DoorDash Inc. is ready to use a unique moment for its business with a long-awaited IPO.
The leading app-based grocery delivery platform in the US, which stated in its prospectus that it has raised $ 2.5 billion from investors including SoftBank's Vision Fund since its inception in 2013, is now aiming claims to raise approximately $ 3.36 billion on the IPO. DoorDash
According to Edison Trends, the company now has 50% of the US market share and also operates in Canada and Australia. There are plans to expand elsewhere.
The San Francisco, California company competes with that of Uber Technologies Inc.
Uber Eats offering and Postmates (which will be taken over by Uber) at 33% and GrubHub
Edison Trends reported 16%. DoorDash notes in its prospectus that its market share in suburban markets that traditionally have not developed delivery infrastructures like cities is actually 58%.
See also: The pandemic turned Postmates' IPO plans into a bidding war between Uber and Wall Street
DoorDash publicly went public on November 13, after it was announced that it started working with the Securities and Exchange Commission in February just before the proliferation of COVID-19 compulsory housing led to a dramatic increase in food delivery service.
The company will have approximately 317.7 million shares outstanding after its IPO, equating to a valuation of $ 32.4 billion at the IPO price of $ 102 per share announced on December 8th. This is well above the latest price range of $ 90 to $ 95 per share it announced on Dec. 4, from a previously expected range of $ 75 to $ 85 per share.
The company intends to trade on the New York Stock Exchange under the ticker "DASH". The listing is led by Goldman Sachs and JPMorgan, two of 12 underwriters listed on the filing.
Here are five things you should know about DoorDash from SEC filing.
It got a pandemic surge, but …
The app-based platform, which works with restaurants and relies on on-demand couriers to deliver take-away meals, said restaurant and grocery delivery has already increased in recent years. The coronavirus pandemic accelerated this and DoorDash saw tremendous growth.
The company's revenue rose to $ 1.92 billion for the first nine months of the year, compared to $ 587 million for the same period last year, according to the prospectus. A total of 543 million orders were placed in the first nine months of 2020, compared to 181 million in the same period last year.
But like other delivery companies, DoorDash is losing money. While the company posted a quarterly profit once this year, it lost $ 149 million in the first nine months of this year, compared to a loss of $ 534 million in the same period in 2019.
“Although we made $ 23 million in net income for the three months ended June 30, 2020, we've made net losses every year since our inception. We expect costs to increase in the future and may not be able to maintain or increase profitability in the future, ”the company stated.
See Also: These are the most popular pandemic orders for state food delivery
In addition, the pandemic poses risks for the company's business. It's already wreaking havoc on many of the restaurant partner needs DoorDash needs – the National Restaurant Association announced in September that 100,000 restaurants have been temporarily or permanently closed since March – and could continue to weigh on the economy.
Other possible pandemic risk factors for the company's business include possible travel restrictions and business closings, impact on the capital and financial markets, regulatory measures, and new outbreaks or information related to the virus.
Yes, this inventory structure is used
The company, which was founded by three former Stanford students in Silicon Valley, will continue to be under the control of the founders after the IPO. This is because DoorDash will have a two-class stock structure that has largely become the norm for tech companies going public since another company founded by Stanford students used that structure when it went public in 2004 accepted: Google
Each Class A share of DoorDash is worth one vote, while each Class B share is worth 20 votes. Company founder and CEO Tony Xu holds the majority of Class B shares at 41.6%, while co-founders Andy Fang and Stanley Tang hold 39.3% and 39.1%, respectively.
From 2017: Founder-friendly warehouse structures are not going anywhere
The first prospectus doesn't tell you how much of the company you will own after going public. But Xu – who will be able to vote on the shares held by Fang and Tang – will join the club of extremely powerful founders who are difficult to hold accountable, such as Google co-founders Larry Page and Sergey Brin, and Facebook Inc. .
CEO Mark Zuckerberg.
Worker classification and proposal 22
Xu put a founder's letter on the file, mentioning his journey as an immigrant who moved to this country from China at the age of 5. He became a dishwasher in a restaurant where his mother worked as a waitress while she was saving up to go back to school because her medical license was not recognized in that country.
"DoorDash is here today to empower those like my mother who came here with a dream to do it themselves," Xu wrote. "The fight for the outsider is part of who I am and what we stand for as a company."
However, DoorDash only spent $ 48.1 million to pass Proposition 22 in California. This exempts DoorDash and other gig companies from a state law requiring them to treat their couriers and drivers as employees. The government initiative promises gig workers guaranteed wages and health grants for the first time, but their continued status as independent contractors means they have no access to sick pay, unemployment insurance and other worker protection that workers are entitled to.
For more: How the gig economy business model will change with Prop. 22
The filing mentions DoorDash initiatives aimed at helping immigrant restaurant owners and refugees, but it doesn't mention that there are many immigrants among the 1 million couriers who have delivered for DoorDash. According to numerous studies and the gig companies themselves, gig workers are largely non-whites and immigrants.
Despite the success of Prop. 22, DoorDash continues to face challenges in terms of classification.
"Even with the 2020 California election initiative and similar laws passed, such initiatives could still be challenged and the subject of litigation," the company said in its filing. "To the extent that Dashers are designated as employees under other state or federal laws, we would have to make significant changes to our existing business model and operations, which would adversely affect our business, financial and earnings position."
Read: Uber Marks Gig Company Efforts To Reshape Labor Law As “IC +”.
Though DoorDash avoids paying into unemployment insurance and other employee-related costs, the company will be increasing the cost of meeting the promises of Prop. 22: Minimum Health Guarantee and Subsidies for Couriers who work enough hours to qualify. If the company is successful in expanding similar measures elsewhere, it incurs additional costs.
Other regulatory concerns
The company is also facing other regulatory concerns, such as a law in California beginning January 1 that bans the company from delivering food from restaurants that it has not asked for permission.
Additionally, DoorDash warned of reporting and accounting vulnerabilities, which is not uncommon for companies looking to go public. The review of the 2018 and 2019 financial statements revealed that the company did not have adequate processes and controls over cash reconciliation revenue and is trying to remedy this by hiring additional staff for accounting, engineering and business intelligence.
Then there is competition. There's plenty of it, and DoorDash's most formidable rival, Uber, is bigger and has deeper pockets.
From 2019: DoorDash made a U-turn when tipping after the riot
Nevertheless, DoorDash can protect its top position in the room well. Not only does DoorDash enable the delivery of prepared restaurant food, but it has made an attempt to deliver other items using DashMart, a convenience store concept recently rolled out in eight cities. The couriers pick up items from local barbecue sauce to Advil to cleaning products from DoorDash fulfillment centers and deliver them to customers who pay a monthly membership fee.
With DashMart, DoorDash competes with the grocery delivery app Instacart, as well as Postmates (the delivery app purchased from Uber) and Amazon.com Inc.
and other retailers.
DoorDash also has countless partnerships, from the NBA's official app to working with retail chains like 7-Eleven, CVS Health Corp.
Walgreens Boots Alliance Inc.
and other. A subscription service called DashPass was also introduced.
The company's position as a leader in app-based delivery appears to be secure, said Pete Flint, general manager of NFX Ventures in San Francisco, which has no direct investment in DoorDash.
"People became interested in famous brands," he said, adding that it would be difficult for other companies to recreate the "incredible flywheel" of customers, drivers, restaurants and partners that the company has amassed.
Autonomous vehicles and drones
DoorDash is exploring long-term delivery options, including autonomous vehicles. The company has a test partnership with General Motors & # 39; Cruise and last year bought AV startup Scotty Labs for $ 5 million. The company also invests in research and development for the delivery of drones.
AV-enabled delivery would reduce the need for DoorDash couriers, but it could take a while to be possible.
"While we believe that autonomous and drone delivery could present significant opportunities, developing such technologies is expensive and time-consuming and may not be successful," the company said in its filing.
For more: Uber says the drones will cost as much to deliver as Uber Eats
However, other startups are experimenting with AV delivery right now, and companies like Amazon and Walmart are testing drone delivery. Uber is reportedly in talks to sell its self-driving unit to AV startup Aurora Innovation.