DoorDash Inc shares popped more than 80 per cent in their debut on Wednesday, valuing the food delivery company at US$71.3-billion or more than four times its worth at a private fundraising round six months ago, underscoring investor appetite for technology companies boosted by the COVID-19 pandemic.
Shares opened at US$182 on the New York Stock Exchange, significantly above the initial public offering (IPO) price of US$102 apiece and closed at US$189.51. The company had raised US$3.37-billion in its IPO on Tuesday.
Such a large first-day trading gain is likely to fuel criticism from some venture capital investors, including Benchmark’s Bill Gurley, who argue investment banks underprice IPOs so their investor clients can score large gains when the stock starts trading.
DoorDash co-founder and Chief Executive Tony Xu, whose stake in DoorDash is worth US$2.8-billion based on the stock’s closing price, said he had no regrets over the company’s IPO price.
“We priced our stock where we did not take every last dollar off the table but where we feel like is a true reflection of our fundamentals,” Mr. Xu said in a telephone interview.
“A lot of people probably want to get access to DoorDash stock and not a lot of people want to sell DoorDash stock. That’s how some of these price fluctuations … are constructed and created. That’s never the goal of the process,” Mr. Xu added.
The IPO gives DoorDash a fully diluted valuation – which includes securities such as options and restricted stock units – of US$71.2-billion, far higher than the US$16-billion it commanded in a June private fundraising round.
Its market capitalization is around US$60.2-billion, more than restaurant chain Chipotle Mexican Grill Inc. and ride-hailing company Lyft Inc. combined.
Founded in 2013, DoorDash is backed by the Vision Fund managed by Japanese tech giant SoftBank Group Corp., venture capital firm Sequoia Capital and sovereign wealth fund Government of Singapore Investment Corp.
The company and rivals Uber Eats, Grubhub Inc. and Postmates Inc have benefited from a surge in demand for food delivery services due to COVID-19 restrictions.
DoorDash revenue for the third quarter ended September reached US$879-million, up from US$239-million in a similar period last year. The company posted a loss of US$43-million after reporting its first quarterly profit of US$23-million three months earlier.
RAMPANT DEMAND
Highlighting investor enthusiasm for technology companies, shares in C3Ai Inc., founded by billionaire tech entrepreneur Tom Siebel, more than doubled in their debut on Wednesday, while Pubmatic Inc., which develops software for digital advertising businesses, saw its shares rise more than 40 per cent.
“These high tech companies that are involved in technologies that facilitate communication like Zoom or facilitate the acceleration of digital transformation, they seem to be very well received by financial markets,” Siebel said in an interview.
A number of big Silicon Valley companies, including Palantir Technologies Inc. and Snowflake Inc., also had blockbuster initial public offerings (IPOs), riding on a stock market rally in the second half of the year that was fuelled by stimulus money and hopes of an effective COVID-19 vaccine.
DoorDash’s listing gains bode well for home rental startup Airbnb Inc., which is scheduled to make a highly-anticipated market debut on Thursday.
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