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DoorDash files for IPO confidentially

Kartik Saini | Flickr

This means that the company can go public by the end of this spring. However, considering the current market volatility, it might not seem like the best time to go public.

DoorDash is one of the leaders in the digital food delivery business. It earned 38% of U.S. meal delivery sales in January, beating out competitors such as Grubhub that had earned 31% and Uber Eats with its 20%. 

DoorDash began in 2012 in Downtown Palo Alto, California, with a simple mission to provide every merchant with a tool to deliver.

Years later, the company has grown significantly. According to the Wall Street Journal, the company was valued at $1.4 billion in 2018. This valuation has grown to $12.6 billion by the end of last year. 

This significant valuation jump has been due to DoorDash’s exponential growth in the industry. 

According to the Second Measure, DoorDash had an 89% year-over-year increase in sales this January.

The competitive nature of this industry has led many companies to differentiate their service. 

DoorDash came out with the DashPass in 2018, which is a subscription service that allows users to get as many deliveries as needed. 

The company also made exclusive partnerships with restaurants such as Wendy’s and Chick-fil-A which allows only DoorDash to make the deliveries. 

However, even after these developments there are few customer loyalties.

According to Second Measure, 59% of DoorDash customer’s exclusively use DoorDash. 

However, as competition rises, customer loyalty decreases. For example, Second Measure also stated that 78% of all Grubhub customers did not use any other delivery service in the fourth quarter of 2017. 

However, this percentage decreased to 59% as other competitors emerged. 

The current market conditions do not suggest an IPO. Companies prefer releasing IPOs when markets are stable, as they can maximize the amount of capital they receive. 

Currently, the COVID-19 coronavirus scare has made the markets bearish and volatile. According to the Wall Street Journal, stocks suffered the biggest weekly losses since 2008 as the Dow Jones Industrial Average fell 12.4% in the last week of February.

Goldman Sachs, the underwriter, and DoorDash believe that markets would recover to a stable and bullish position when they do release the  IPO. However, there is still a risk that COVID-19’s rapid spread will have more long-term effects. 

It is also important to note that DoorDash did not have to announce their IPO as they filed it confidentially. 

However, the announcement might persuade possible investors to start thinking about investing in the company.

Increasing demand means a higher issuing price and more capital to DoorDash as their stock would be more expensive. 

Therefore, going public can help DoorDash to acquire the funding needed to expand in the competitive industry.

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