DoorDash's IPO
Embedded Files
Nov 2020
DoorDash is hitting the stock market at an interesting time. We're in the midst of this pandemic and delivery orders are more popular than ever before. DoorDash's numbers are going to be as strong as they'll ever be (unless there's another pandemic).
Taking a step back to look at DoorDash as a whole, there are things to be concerned about.
Criticism about how they treat their drivers
Competition from Uber Eats and GrubHub
Is their growth sustainable, even when the pandemic is over?
DoorDash currently has a large share of the market, leaped to first position because it aggressively expanded into markets, sometimes controversially adding restaurants. Last year Uber attempted to merge with them, but they couldn’t come to an agreement. Then DoorDash acquired Square’s Caviar food delivery service for $410 million, which is still available to use.
Revenue Model
Doordash's revenue comes from fees, subscriptions and advertising.
DoorDash connects customers who want a meal, restaurants that prepare it, and Dashers who deliver it. Each group plays a role in making the business work.
Their revenue comes from:
Commission on the order total (20-25%)
Delivery fee
Advertising
Monthly subscription fee
Credit card processing fee (2%-3%)
Something to keep in mind is that DoorDash is choosing to IPO before its even profitable.
2018: ($204M)
2019: ($667M)
2020: ($461M)
How much is DoorDash worth?
Now lets look at their funding history to get a sense of what investors think DoorDash's business is worth.
DoorDash has raised a total of $2.5B in funding over 13 rounds.
Note: DoorDash did one more funding round earlier this year - Series H for $400M.
DoorDash’s IPO: A Wild Ride from $29 Billion to $51 Billion
DoorDash initially set its IPO price at $102 per share, which generated lots of interest and demand in the stock. By the time trading began, the opening price jumped to $182—an 80% increase.
This price jump gave DoorDash a valuation close to $51B, almost doubling its last valuation of about $29B.
283M shares × $102 (Initial IPO price) = $29B market cap.
However, the price opened at $182.
283M shares × $182 = $51B market cap.
This is a pretty significant difference. DoorDash and its analysts believed DoorDash to be worth $29B. Market hype and speculation brought the price up, giving DoorDash a market cap of $51B.
The $29B valuation by analysts could have been a conservative assessment based on the numbers. The $51B market valuation however, was purely driven by hype, speculation and demand.
How did investors do?
Let's focus on two of the many early investors: Sequoia and SoftBank.
Sequoia Capital ($415M)
Sequoia was one of DoorDash's earliest investors (series A, 2014)
It participated in a total of 4 investing rounds amounting to $415M.
_______________________________
From the S-1, Sequoia owns approx 52M shares.
52M × $182 = $9.46B
Invested $415M, making $9B in profit.
SoftBank ($680M)
Series D: $280M
Series F and G: $350M
Series H: $50M
_______________________________
From the S-1, SoftBank owns approx 63M shares.
63M × $182 = $11.47B
Invested $680M, profiting well over $10B.
Will I buy their stock?
Probably not. While DoorDash’s IPO was a huge win for early investors, but I think the current stock price has overvalued the company. They have yet to turn a profit and will DoorDash’s growth rate continue after the pandemic?
Page updated
Google Sites
Report abuse