Ahead of its initial public offering, DoorDash priced its shares at $102, only for the stock to open nearly 80 percent higher at $182 per share on Wednesday.
This is only the latest in a series of share price adjustments and valuation jumps stretching back to June. In June, the company was privately valued at $16 billion thanks to an acceleration in food-delivery demand thanks to COVID-19 lockdown orders. By the spring of this year, DoorDash was safely the largest food-delivery service in the country, larger than UberEats and GrubHub combined.
This sky-high stock price comes despite the fact that DoorDash, like most if not all gig economy companies, has never been profitable.
After it warned investors in its S-1 that it may never be profitable and its own pay model was a risk to its business, DoorDash revealed late November it was seeking a valuation of up to $31.6 billion and hoping to raise upwards of $2.8 billion in its offering—shares would be priced at $75 to $85. A week later, DoorDash pushed its target price range to between $90 and $95 per share, raising up to $3.1 billion on its offering at a valuation of $35.3 billion. The day before its market debut, DoorDash modified its target range yet again to $102 per share, looking to raise $3.4 billion at a valuation of $39 billion. At $182 a share, DoorDash’s value is floating at $60 billion.
DoorDash’s S-1 indicated huge growth, with 2019 revenues growing 204 percent from the previous year and revenue up 226 percent for the nine months ending September 30 thanks to the pandemic. DoorDash pointed to improvements in its margins as evidence of a clear path to profitability, but given the risks its S-1 highlighted concerning the chance that Dasher algorithmic pay models could spark regulatory or legal battles—as well as the failure of competitors to grow into profitability—it’s yet to be seen whether the company can delivery on this promise.
Before its market debut, DoorDash promised to yield a massive return to its largest investor: SoftBank’s Vision Fund, the $98 billion fund run by Japanese billionaire Masayoshi Son that invested $680 million for a 24.9 percent stake in the company. At its initial public offering price, SoftBank’s stake was worth $6.4 billion—after the nearly 80 percent jump in stock price on Wednesday, it’s worth about $10 billion.
Part of DoorDash’s fortunes can be traced back to the pandemic, but also to the victory of Prop 22 in California—its largest market. After a coalition led by Uber and other app-based gig companies spent over $200 million on a ballot measure written to exempt themselves from reclassifying gig workers as employees, the coalition promised to pursue similar legislation nationwide. Named “IC+”, the plan would effectively make legal the misclassification of gig workers as independent contractors exempt from basic (and expensive) labor law protections such as a minimum wage, health care, workers’ comp, and other benefits.