Shares of DoorDash Inc. soared during their first day of trading Wednesday, after the “gig” company completed one of the biggest initial public offerings of a busy year.
priced its shares higher than an elevated range, then started trading at $182 Wednesday morning, a 78.2% pop from their IPO price of $102. The San Francisco company, which launched its service in the suburbs of Silicon Valley in 2013 and now commands half the U.S. market for app-based food delivery, raised at least $3 billion at a valuation of more than $32 billion.
DoorDash confidentially filed for a public offering in February, right before the coronavirus pandemic shut most everything down and demand for delivery skyrocketed. Months later, it is the latest company to take advantage of a hot IPO market after becoming one of the biggest beneficiaries of a way of life and economy that has been changed dramatically by COVID-19.
Now the question is whether it can keep growing and sustain its gains. In a CNBC interview Wednesday morning, DoorDash Chief Executive Tony Xu said the company is just getting started.
“We’re in one of the biggest but still most under-penetrated categories,” Xu said, noting that only 10% of restaurant traffic is being delivered today. The company also is branching out to delivering groceries and more.
Tom White, analyst with D.A. Davidson, said in an interview that although he expects the company’s “growth rates to come back down to Earth” once a coronavirus vaccine is deployed, DoorDash has an advantage because of the market position it established pre-pandemic.
But investors surveyed by Bernstein before the public offering expressed concerns about whether growth will slow — DoorDash’s third-quarter revenue soared 268% year over year — competition and what happens after the pandemic, such as whether consumers will hang onto their delivery habits.
“COVID is simply a unique point in time where consumers aren’t spending on other types of services (e.g. travel),” the Bernstein report said.
Before the offering, the top shareholders in DoorDash were early investors SoftBank Vision Fund, which held 24.9% in Class A stock, Sequoia Capital with 20.4% and Greenview Investment with 10.5%. Because of the company’s stock structure, which gives 20 votes to each Class B share, Xu and co-founders Andy Fang and Stanley Tang will have 69% voting control.
The co-founders were joined by a couple of delivery workers, which the company calls Dashers, and merchant partners in a virtual bell-ringing Wednesday morning on the New York Stock Exchange.
The company, which along with Uber Technologies Inc.
and other gig companies recently spent more than $200 million to pass a ballot measure in California to avoid classifying their drivers and delivery workers as employees, said U.S. Dashers who have made at least 5,000 deliveries will receive “cash rewards” ranging from $500 to $20,000. The amounts will be based on the workers’ number of deliveries and show up in their accounts between now and Friday.
Dashers in Canada and Australia will also receive cash based on different criteria. The gig workers will get more cash through this program through May, DoorDash said.