The largest food delivery service in America is boosting its price target for its planned IPO.
DoorDash has amended its S-1 filing Securities and Exchange Commission, announcing that it will price its Class A shares between $90 and $95 per share. This is an increase from the formerly announced $75 to $85 per share.
This announcement is expected to raise up to $3.14 billion in DoorDash’s U.S. initial public offering. The company plans to sell 33 million Class A shares to hit this target.
“DoorDash is much more than an application that connects merchants, consumers, and Dashers by facilitating delivery. We provide a broad array of services that enable merchants to solve mission-critical challenges such as customer acquisition, delivery, insights and analytics, merchandising, payment processing, and customer support, and to fulfill demand generated through their own channels,” said founder and CEO Tony Xu said in a statement.
DoorDash was founded in 2013 and is backed by Japanese tech giant Softbank, Sequoia Capital, and sovereign wealth fund Government of Singapore Investment Corp.
DoorDash is set to go public in December alongside a planned listing by home rental startup Airbnb, which is sure to make December a busy month for IPOs.
Last month, DoorDash announced impressive revenues for 2020. The company stated that for nine months of 2020, ending in September, the company’s revenue was $1.92 billion. That is more than triple the $587 million total revenue the company achieved over the same period last year.
In comparison to its food delivery competitors, DoorDash is the largest service provider. The company occupied a roughly 50% share of the U.S. food delivery market in September. According to Second Measure research, the market share held by DoorDash is well ahead of Uber’s Uber Eat’s 22% and GrubHub’s 20%.
Investors should be wary of DoorDash’s IPO, as some red flags have been raised about the company’s profitability. Despite the high revenue, the company still reported a net loss of $149 million for the same 2020 period ending in September.
The loss raises questions about DoorDash’s ability to be profitable. DoorDash itself is aware its recent profits are boosted by the pandemic causing more people to order food.
“The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 pandemic may not continue in the future,” the company cautioned, pointing out that the pace of revenue and total order volume would likely decline.
There is also a question of scale for food delivery services. Companies need to invest and grow their businesses to scale-up and ensure profits. However, DoorDash already controls roughly 50% of the market and is valued at $16 billion, drawing into question just how much more scaled-up the company can get.
Despite concerns, the public offering is still set to have a strong position when it begins trading.