Food delivery company DoorDash (DASH) is going public this week on the New York Stock Exchange seeking to raise $3.14 billion.
The Silicon Valley start-up backed by Softbank is taking advantage of a hot IPO market and a spike in food delivery usage amid the pandemic. The company is aiming to price anywhere between $90-$95/share, according to its latest S-1 filing. Previously it had targeted a price of $75-$80/share.
The company reported $1.9 billion in revenue and a loss of $149 million in the 9 months ending September 30. DoorDash boasts more than 1 million delivery workers (“Dashers”) and 18 million customers.
It’s offering a three class approach for its shares, fending off any potential activist investors and assuring the voting power of CEO and founder Tony Xu.
Class A shares will hold one vote each. Class B shares will each have 20 votes, and will go to key co-founders and early investors. Class C shareholders have no voting rights.
The company has received some bullish calls ahead of its IPO, as well as a scathing criticism from research firm New Constructs.
“This IPO reminds us of WeWork’s attempted IPO, which we called ‘The Most Ridiculous IPO of 2019,’ because DoorDash’s business is similarly disadvantaged,” wrote David Trainer, CEO of New Constructs, in a note to investors.
He went on to say “to justify a $25 billion valuation, the company needs to grow its share of global food delivery app market to 56% from ~16% over the trailing twelve months (TTM) while also raising margins from -12% to 8% in an intensely competitive business.”
The food delivery service was initiated with an Outperform rating and a price target of $100 at Fox Advisors.
DA Davidson rated the stock a Buy with a price target of $93 ahead of the IPO.
The rating comes amid the company’s “leading market position in U.S. online food delivery, strong recent [market] share gains, and better-than-expected recent profitability trends,” wrote analyst Tom White in a note to investors.
The food delivery platform faces stiff competition, as highlighted in its S-1 filing.
“In the United States, we compete with other local food delivery logistics companies, such as Uber Eats (UBER), Grubhub (GRUB), and Postmates,” and chain merchants that have their own online ordering platforms.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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