DoorDash raised $3.4 billion in its IPO, making it the second highest IPO in 2020, according to Renaissance Capital.
The IPO represents a year of massive growth for the food delivery company. In the first nine months of this year alone, DoorDash reported revenue of $1.9 billion on increased consumer demand for quick delivery during the pandemic. Christopher Payne, DoorDash’s COO, added that the funding will allow the company to expand into other areas such as grocery and convenience store deliveries.
“Ultimately, a lot of these trends will stay,” he said. “DoorDash is a platform that’s enabling the small, local merchant to play in this space, bringing the product in minutes, not days.”
However, like many startups that prioritize growth, DoorDash is still losing money. It has not posted a full-year profit since 2013. Despite high demand for delivery, DoorDash revealed it continued to lose money during the pandemic, according to financial documents released ahead of its IPO.
Critics have warned that the company, which has yet to become profitable, is overvalued and may have trouble keeping its momentum going if demand for delivery subsidies post-pandemic, reported CBS News (Dec. 9).
David Trainer, CEO of investment research firm New Constructs, called DoorDash the “most ridiculous” IPO of 2020. “DoorDash’s IPO holds no value and the company may never be profitable,” said Trainer.
The company reported a net loss of $667 million in 2019 and lost $149 million in the first nine months of 2020. DoorDash said it turned a profit of $23 million in the second quarter this year, but lost $43 million the next quarter.
Meanwhile, DoorDash customers in Chicago began seeing a new charge of $1.50 added to their delivery and takeout orders called the “Chicago Fee,” reported Eater (Dec. 9).
The company offered this explanation: “Chicago has temporarily capped the fees that we may charge local restaurants. To continue to offer you convenient delivery while ensuring that Dashers are active and earning, you will now see a charge added to Chicago orders.”
On Nov. 23, Chicago’s City Council signed off on a 15% cap for third-party delivery ordering services. Restaurant owners told Eater Chicago that they’re not surprised by the fee, as their trust in many third parties has diminished during the pandemic.
Additionally, the District of Columbia Attorney General reportedly sent DoorDash a letter ordering the company to stop charging restaurants a 30% commission on each order in its DashPass subscription product, which would violate Washington DC’s code that caps such commissions at 15% for third-party delivery platforms, reported Reuters (Dec. 9).
DoorDash said it recognized there has been confusion regarding pricing regulations in DC.
“While DashPass is a premium marketing offering and provides benefits to many restaurants, we have decided to not charge DC restaurants their contractual DashPass rate at this time,” a DoorDash spokeswoman said in a statement.