DoorDash, the food delivery app that’s used to ringing doorbells with lunch orders for customers, rang its IPO bell on the New York Stock Exchange Wednesday.
The offering, which was the first of two highly anticipated market debuts this week for tech companies impacted by the coronavirus pandemic, made headlines Tuesday when it priced its shares at $102 apiece, above its earlier expected range. The stock soared nearly 80% on its opening today, changing hands at $182 per share.
In late trading, shares hovered around $189.
DoorDash is one of a slew of delivery apps that saw tremendous growth during the pandemic, as restaurants shut down indoor dining and stay-at-home orders proliferated. Over the past few months, the San Francisco-based company has emerged as the leading food delivery service by market share, and its debut put its valuation at nearly $70 billion, greater than those of Chipotle, Domino’s, and Dunkin combined.
But the reason for its skyrocketing demand is the same reason some investors are wary of its stock, as they look ahead toward the pandemic’s ending and question whether DoorDash’s starry success is sustainable.
That seems to be a question DoorDash itself is asking. In its IPO prospectus, filed with the Securities and Exchange Commission, it wrote:
“With the COVID-19 pandemic, we have experienced a significant increase in revenue, Total Orders, and Marketplace GOV. The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 pandemic may not continue in the future, and we expect the growth rates in revenue, Total Orders, and Marketplace GOV to decline in future periods.”
In the same filing, it also reported a revenue of $1.9 billion in the nine months ending September 30, up from $587 million during the same time last year. But despite the boost, DoorDash is still operating at a net loss, which lessened from $533 million to $149 million year over year.
Regardless of whether DoorDash’s revenue dips after the pandemic ends, most agree that food delivery companies are here to stay. The industry is already experiencing growing pains as bigger businesses have begun to gobble up smaller ones. Uber Eats, for example, bought Postmates, and Europe’s Just Eat Takeaway bought Grubhub this year.
Yet the rise of the delivery companies may come at the expense of restaurants themselves, some say, especially within the pressure-cooker environment wrought by the pandemic. Stories in The New York Times detail the large fees imposed by apps on partner restaurants who, crippled by the pandemic, had no choice but to pay up. (DoorDash declined to comment on the criticism.)
Additional concerns abound over what’s been viewed as deceptive business practices by delivery apps more broadly, and over their alleged mistreatment of delivery workers. DoorDash itself has faced legal action over such issues, recently settling a lawsuit alleging it misled customers on how tips were allocated to workers. It most recently settled a spat with the District of Columbia Attorney General’s office over the fees it was charging restaurants for its DashPass premium service.