SAN FRANCISCO — DoorDash rode its wave of new business to a stock market debut on Wednesday, making an initial public offering on the New York Stock Exchange during the heat of a pandemic in which food delivery has become the new darling of Silicon Valley’s gig economy.
The offering is fueled by the company’s rapid growth over the past few months, during which consumers turned to food delivery apps in record numbers as they stayed at home to avoid getting sick. DoorDash is one of the main apps that contracts with restaurants and drivers to get food quickly to people’s homes, typically for a fee of a few dollars or a membership plan.
That surge in usage even resulted in a narrow profit in one quarter earlier this year, marking a rare distinction in an industry that typically blows through billions of dollars thanks to incentives and discounts to attract new customers and drivers.
DoorDash presents a different sort of bet than Uber and Lyft, which rely on a similar pool of drivers but have seen their ride businesses plummet as consumers stay home. Food delivery has become a bright spot.
At Uber, which has its own food delivery business in UberEats, steep ride-hailing losses have been padded by the surge in food deliveries during the pandemic, and the company even announced the acquisition of delivery competitor Postmates in July.
DoorDash spokesman Ali Musa declined to comment, citing the quiet period preceding its IPO.
But DoorDash has emerged as the industry leader in the United States, logging half of delivery sales in the country as of October, according to its IPO filing.
Still, DoorDash has no illusions about the journey to profitability, according to its stock market filing. Its IPO would continue the industry model of using costly subsidies to lure users to its app and incentives to bring drivers in the fold.
“We expect our costs will increase over time and our losses to continue as we expect to invest significant additional funds towards growing our business and operating as a public company,” DoorDash said in its IPO filing in November.
Analysts said timing worked in DoorDash’s favor as it moved to go public.
“This is a great opportunity to become public at a time where you’ve done two things: You’ve ramped your user base … and you’ve shown a profit,” said Benjamin Black, an analyst at Evercore ISI. Still, its meteoric growth rates are not sustainable, he said.
DoorDash acknowledges the unusual circumstances powering its most recent growth in its IPO filing.
“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, and we expect the growth rates in revenue … to decline in future periods,” the company said.
DoorDash, like its ride-hailing competitors, has prided itself on efficiency. It sees an industry advantage in the algorithms that power its app, along with its focus on delivery compared with rivals that juggle multiple services. In the filing, the company touted the advantages of its data collection.
“[O]ur algorithms predict the ideal number of Dashers needed in a given location at a given time,” DoorDash said. “This helps balance the supply of Dashers with consumer demand and keeps Dashers busy when they are using our local logistics platform.”
But there are lingering questions over whether DoorDash’s most dramatic advantage of late can hold. Some restaurants have teamed up with delivery services only during the pandemic, and it’s unclear whether the trend will hold with both consumers and restaurants when a vaccine becomes more widely available and people are able to be out and about more freely again.
“What they’ve had throughout covid is restaurants by and large have had no other avenue to reach consumers other than through third-party delivery platforms like DoorDash and Uber,” said Black, of Evercore ISI.