Few industries have capitalized on the pandemic as successfully as food delivery services. As the industry (as a whole) grows and establishes, competition stiffens between platforms such as Postmates, Uber Eats, DoorDash, and more.
DoorDash, however, is currently leading the U.S. in sales, has been on a financing streak, and is gearing up to make its public debut on the New York Stock Exchange. After submitting its filing documentation last week, opinions are definitively split on how the market is going to respond.
Here’s what you need to know about DASH before the first trading bell rings.
When you’re a company in a new and disruptive industry, regulators can often prove to be stronger negative force than competitors can. Not long ago, DoorDash was at (regulatory) war with the State of California over labour law changes.
DoorDash is one member of a suite of companies that aggressively lobbied to pass Proposition 22 (colloquially called “Prop 22”) in California at the beginning of November. This bill exempts the company from a new labour law that would require it to classify its delivery drivers as employees, rather than contractors. Among the affected companies are contractor giants Uber and Lyft, which saw an intraday stock price jump of 15% and 11%, respectively, following the news.
While profitability is still a massive concern for the business amidst a backdrop of intense competition, the passage of Prop 22 has alleviated a major concern about increased labour costs, prior to public filing.
In June 2020, DoorDash raised an additional $400M at a valuation of $16B – up from its $12.6B valuation in May 2019 – securing its place among pre-public unicorns.
With large industrial backers such as SoftBank and Sequoia in the mix, the company has raised a total of $2.5B over its life, according to Crunchbase, securing it as an aggressive delivery competitor focused on growth and market share, rather than profitability.
With support from venture capital firms across the world (though many are concentrated in the Valley), DASH is connected in many different functional areas and could leverage these connections to grow. After all, venture capital is as much about the people handing over the
Before the recent vaccination news, DoorDash was set up to IPO at the perfect time; however, now that stay-at-home and social distancing stocks are seemingly on the outs, it’s hard to predict how short-term sentiment will affect the public offering.
With a definitive oligopoly now controlling 92% of the overall meal delivery market, DoorDash’s place as market leader is reasonably assured for the near-term. Controlling 50% of the overall market makes continued growth a certainty and allows investors to predict revenue increases based on industry growth. With a relatively attractive bottom-line considering the market share battle brought on by massive industry competitors, DoorDash could be considered an attractive purchase by those who agree with its current valuation.
Altogether, ongoing financial implications from the pandemic leave investor sentiment toward the company volatile, with investors wondering whether this IPO is going to look more like Snowflake… or WeWork.