WSJ US BusinessDoorDash’s IPO Delivers as Shares Surge in Market Debut

December 9, 20200
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The New York Stock Exchange welcomed executives and guests of DoorDash via vidoeconference in celebration of DoorDash’s IPO Wednesday.

Photo: NYSE

DoorDash Inc. delivered for investors, surging 86% in its stock-market debut on Wednesday.

The seven-year-old company ended its first trading day valued at about $71.8 billion, higher than many of the restaurant companies that depend on its couriers.

DoorDash’s shares opened Wednesday afternoon at $182 each on the New York Stock Exchange, 78% above its higher-than-expected initial public offering price.

The stock ended trading at $189.51, giving it a market value—on a fully diluted share count—that surpasses the combined worth of Chipotle Mexican Grill Inc., Domino’s Pizza Inc. and Dunkin’ Brands Group Inc.

The San Francisco-based company has never turned an annual profit, but a surge in demand during the Covid-19 pandemic has helped to transform it.

Revenue and orders at DoorDash more than tripled this summer and fall, compared with the year before, as consumers tired of prepping food at home and ordered more meals for delivery. A push into the suburbs also has helped DoorDash become the market leader in U.S. food delivery.

Founded in 2013 by Tony Xu, who emigrated from China with his parents when he was 5 years old, DoorDash now must defend its nearly 50% U.S. market share in the competitive food-delivery industry and stoke further growth to satisfy heightened shareholder expectations.

The company believes the ease by which diners can get food delivered won’t be a fad, but demand could slow as vaccines for the coronavirus are distributed and patrons return to restaurant dining rooms they have been avoiding.

“Once people get used to a habit, they tend to stick with it. We saw this with e-commerce, we saw this with booking travel over the internet,” Mr. Xu, a 36-year-old who earned an M.B.A. from the Stanford Graduate School of Business, said in an interview.

DoorDash has trained its efforts on suburban areas, allowing the company to benefit in part because families there tend to place larger orders.

Ghost kitchens are popping up all over the U.S. as food delivery soars and dining at restaurants plummets amid the pandemic. These businesses, which can host food preparation for multiple restaurants at a single location, are attracting interest from investors and restaurateurs. Photo: Adam Falk/The Wall Street Journal (Originally Published December 3, 2020)

The company controlled almost half of the U.S. food-delivery market as of mid-October, up from one-third the year earlier, giving it a lead over Uber Technologies Inc.’s UBER 1.47% Eats service, Grubhub Inc. and other rivals.

The company will be the only public stand-alone U.S. food-delivery company after Grubhub agreed to be acquired in June.

Uber Technologies recently bought rival Postmates Inc. for $2.65 billion, in a move aimed at helping it in delivery.

DoorDash has focused on boosting the number of restaurants from which consumers can choose on its app and expanded into grocery deliveries during the pandemic.

Mr. Xu said deliveries became faster during the health crisis, in part because of less traffic on streets and because DoorDash became more efficient.

The pandemic also has resulted in stronger demand for food-delivery companies. Both chain and independent operators have tapped delivery companies to reach customers as they closed dining rooms or limited seating indoors.

“What the pandemic has done and what DoorDash has shown, at least in its filings, is you’re able to hit profitability,” said Evercore ISI analyst Benjamin Black, who covers Uber.

In the second quarter this year, DoorDash generated a profit of $23 million.

Some restaurant companies have pushed back on the fees and costs that delivery companies charge them. Others, such as Domino’s Pizza, don’t use third-party delivery firms, citing those costs and other factors.

Those battles could intensify in the future. Uber, for example, said merchants deserved transparency on pricing when it completed its acquisition of Postmates in December.

DoorDash faced criticism last year from advocates about how its couriers were compensated, a situation that led it to tweak how it handles tips that diners leave for them.

The company joined with other on-demand companies to fight a California law that sought to reclassify contract workers as full-time employees.

DoorDash’s public offering occurred amid a surging stock market and robust gains among technology companies listing their stocks for the first time.

So far in 2020, more than $140 billion has been raised on U.S. exchanges, far exceeding the previous full-year record set at the height of the dot-com boom in 1999, according to Dealogic data that date to 1995.

Home-rental startup Airbnb Inc. was expected to price its shares at $67 or $68 each, above its already increased targeted range, people familiar with the matter said, in yet another sign of exuberance in the IPO market.

DoorDash’s co-founders, like those from other tech startups, have sought to shore up voting control of their company.

Mr. Xu will own a special class of stock through which he will have about 69% of the voting control of the company. Mr. Xu said potential investors didn’t ask questions about his voting control.

Major owners of DoorDash stock include entities affiliated with SoftBank Group Corp. , Sequoia Capital and the government of Singapore, according to the company’s prospectus for the public offering.

For the quarter ended Sept. 30, DoorDash reported a loss of $43 million on $879 million in revenue, compared with a loss of $152 million on $239 million in revenue for the year-earlier period.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 10, 2020, print edition as ‘DoorDash Brings Big Gains In Debut Of Shares.’

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