MarketWatch First Take: Gig Work shares are in a bear market and the cloud is unlikely to dissolve anytime quickly

Gig Work stocks had a terrible month, and the regulatory clouds that are worrying investors aren't going to go away anytime soon.

DoorDash Inc.
+ 22.15%
was able to buck the trend on Thursday and surprised investors with gross orders that were well above analysts' expectations and more than three times the volume a year ago. Shares rose nearly 8% in over-the-counter trading as the company also increased its full year net volume and adjusted earnings outlook.

"The negative impact on consumer behavior was less than originally expected, and so we were able to exceed our forecast for the first quarter by 9%," said Prabir Adarkar, chief financial officer of DoorDash, to analysts on Thursday.

DoorDash's optimistic view, which stated that restaurant openings and home delivery can coexist, was a much-needed optimism in the Gig Company arena, which has been under a cloud since late April.

On April 28, Uber Technologies Inc.
+ 6.61%
was trading at $ 58.44, Lyft Inc.
+ 7.89%
was at $ 63.40, Grubhub Inc.
+ 3.19%
was at $ 70.06 and DoorDash Inc.
+ 22.15%
traded at $ 162.45. But a day later, the inventories of these soaring companies were hit by news that the Biden government's new Secretary of Labor, Marty Walsh, believes most gig workers should be classified as white-collar workers – which is the cost of those Company would increase.

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Today, stocks in these companies have fallen an average of 25% since a bear market turnaround in late April. Lyft is down 30% and Uber is down 23%. GrubHub is down 20% and DoorDash is down 29%.

There is also concern that when people return to restaurants, demand for supplies will fall after the growth has been compressed from potentially years during the pandemic to one last year.

The downturn has been exacerbated by recent earnings reports, which have often raised the issue of possible regulation by analysts. Last week, investors also got a glimpse of how much it will cost to treat workers as workers when Uber said it had reserved $ 600 million for reimbursement payments to British drivers following a ruling in the UK in a case that one Includes minimum wage, vacation pay and possibly pension contributions.

The employee rating question finally surfaced on DoorDash's call when an analyst asked executives how they responded to Walsh's comments, including the news that the labor secretary would speak to top executives at the gig companies.

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“We are very pleased with what we have heard from Secretary Walsh and the Biden Administration. We were very excited to work with ourselves and the private sector companies to find out how to actually build a model that will enable this to take us into the 21st century, ”said Tony Xu, Chief Executive of DoorDash, adding that that Company number 1 hears from its employees: “They want this flexibility that has never existed in any work environment before. "

Xu then reminded analysts that the Ministry of Labor has not yet taken any action and has expressed an interest in working with all gig economy companies.

A lot has happened between these companies and the new administration, but it is clear that there will be more regulation against big tech in the next year. The tough stance against Apple Inc.
+ 1.98%,
Facebook Inc.
+ 3.50%,
+ 2.21%
Google and Amazon
+ 1.94%
will likely filter down on these companies as well, including the smaller ones like DoorDash.

It's a big problem that will affect all gig work businesses, regardless of their financial performance in the meantime. Now that investors have at least one example of the potential cost of their business models, they decide it might not be worth staying longer.

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