US food delivery startup DoorDash has made a startlingly successful debut on the New York Stock Exchange, seeing its share price spike 78% on the first day of trading.
Earlier this week, the business revealed its opening share price of US$102 ($139), giving it a valuation of US$41 billion ($55 billion).
On its first day as a public company, that skyrocketed to US$189.51, bringing that valuation up to more than US$70 billion.
For context, that’s up from a reported valuation of US$16 billion back in June, when it raised US$400 million in funding.
In total, it had banked US$2.5 billion from venture capital backers.
According to PitchBook, DoorDash’s steep opening share price gave the startup the third-highest valuation of a VC-backed business to debut on the US stock exchanges in the past decade, behind Facebook and Uber.
DoorDash may be about to be unseated though. Airbnb is also expected to price its long-awaited IPO imminently. At the top end of its anticipated price range, it could have a valuation of $41.5 billion.
Still, all of DoorDash’s apparent success this week comes despite the fact the business is still not profitable.
DoorDash reported revenue of US$1.9 billion for the first nine months of 2020, according to its IPO prospectus, up from US$589 in the same period last year.
It also revealed net losses of US$149 million. That’s less of a loss than the US$533 million it registered in the same time period in 2019.
It was briefly profitable in the June quarter of 2020, but that appears to have been an anomaly, not a trend.
That’s despite a surge in business brought on by the COVID-19 pandemic, which is keeping people at home and ordering in. And that growth is expected to slow as the crisis abates.
The enormous valuation throws up old questions about whether fast growth truly equals value.
WeWork’s failed IPO attempt last year was a reminder that over-hyping a tech company can ultimately come back to bite it.
Of course, DoorDash made it to its first day of trading, but that hasn’t stopped one analyst calling it “the most ridiculous tech IPO of 2020”.
In an article for Business Insider, veteran Wall Street analyst and founder of New Constructs David Trainer said the IPO essentially “holds no value … beyond bailing out private investors”.
Trainer put the business’ growth mainly down to the pandemic.
With any luck, that market environment is not going to last, and so DoorDash’s growth trajectory won’t either.
“It took a global pandemic to drive the firm’s one quarter … of GAAP profitability. The firm has not been profitable since, and we think it may never be,” he reportedly said.
Founded in Palo Alto in 2012, DoorDash Now, it’s operating all over the US, as well as in Canada and Australia.