Delivery giant DoorDash plans IPO

NEW YORK (AP) — Delivery giant DoorDash Inc is planning to sell its stock to the public, capitalising on the growing trend of consumers embracing app-based deliveries as much of the world stays home during the pandemic.

The San Francisco-based company filed papers signalling its intent for initial public offering (IPO) on Friday.

“Technology has changed consumer behaviour and driven a wave of demand for convenience,” the company said in its prospectus. “Recent events have further accelerated these trends, pulling the future of e-commerce forward for businesses large and small.”

Its revenues reflect the explosion in demand for delivery. Last year, DoorDash generated USD885 million in revenue. During the first nine months of 2020, revenue more than doubled that to USD1.9 billion. It was already growing before the pandemic. In 2018 it brought in USD291 million in revenue.

But DoorDash has lost money each year since its founding and the company warned potential investors the losses could continue as the company anticipates increasing expenses. It had a net loss of USD667 million in 2019 and USD149 million in the first nine months of 2020. The company did turn a profit of USD23 million in the second quarter this year, but followed that with a USD43 million loss in the third quarter.

DoorDash said it expects to spend substantial resources developing its platform, including “expanding our platform offerings, developing or acquiring new platform features and services, expanding into new markets and geographies, and increasing our sales and marketing efforts”.

DoorDash, which was was founded in 2013 in Palo Alto, California, has more than 18 million customers and one million “dashers” who deliver food in the United States (US), Canada and Australia. It has more than 390,000 merchants in its network.

The announcement came a week after delivery companies scored a major victory in California, where voters passed Proposition 22, which allows app-based delivery companies to treat drivers as contractors instead of employees. Before that passed, they were facing a future where they would have to treat drivers as employees with access to costly benefits such as overtime and sick days. Ride-hailing and delivery companies won an exception, and instead they’ll offer limited benefits such as health care subsidies to drivers who clock 25 hours per week.

It’s clear DoorDash waited to start the IPO process until after the vote on California’s Proposition 22, said Wedbush analyst Daniel Ives.

“That would have been an uphill battle had Prop 22 not passed in California,” Ives said. “That puts a dark cloud in the rearview mirror and really opens the spigot for investor appetite.”

DoorDash said it has captured 50 per cent of the food delivery market in the US, followed by Uber Eats, Grubhub and Postmates.