DoorDash prices shares above range as investors flock to IPO

DoorDash priced its initial public offering above expectations, capping a dramatic rise for the US meal delivery company whose business has flourished during the pandemic while drawing a backlash from restaurant groups.

The San Francisco-based company sold shares to investors at a price of $102, according to two people briefed on the matter, exceeding its price range of $90 to $95.

At the new higher price DoorDash is raising almost $3.4bn in proceeds and will have a market capitalisation of $32.4bn, making it the largest standalone public meal delivery company in the US. 

DoorDash had already raised its price range last week, in a sign of the demand among public investors for fast-growing, technology-driven companies.

The group’s shares will begin trading on the New York Stock Exchange on Wednesday. It declined to comment on the pricing.

DoorDash has quickly risen to become the largest player in the US food delivery market, taking 50 per cent of total order value in October, according to Edison Trends data.

But it has also faced backlash from some restaurant groups, who say its commission rates are too high. In several cities officials have stepped in to reduce fees during the pandemic.

Investors have also questioned whether DoorDash and its competitors can be profitable in the long-term, leading to a wave of consolidation in the industry this year.

DoorDash reported a surprise profit of $23m in the second quarter as the demand for food delivery spiked during the pandemic. In its most recent full year of operations, the company made a net loss of $667m on revenues of $885m.

“Once they start trading, you will have all three of the large online food delivery companies in the US operating under the glare of public markets, and public company investors are less patient when it comes to ploughing millions and millions of dollars into marketing and promotional campaigns if it’s not going to yield profits and cash flow,” said Tom White, senior research analyst at DA Davidson.

DoorDash burnt through private funding before going public. SoftBank’s Vision Fund and Sequoia Capital will own more than 40 per cent of the company’s class A common stock after the offering. At the IPO price SoftBank’s stake would be worth $6.4bn and Sequoia’s would be worth almost $5.3bn.

Tony Xu, DoorDash chief executive, will become a billionaire on paper after the listing, with a stake worth $1.5bn at the IPO price. Along with DoorDash’s co-founders, he will also retain control of the company through special class B common stock with 20 votes a share.

Goldman Sachs and JPMorgan served as lead underwriters on the offering.

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