DoorDash, the leading food delivery app in the U.S., filed its IPO prospectus with the Securities and Exchange Commission on Friday. The company will list its shares on the New York Stock Exchange under the symbol DASH.
DoorDash reported $1.9 billion in revenue for the nine months ended Sept. 30. That’s up from $587 million during the same period last year. As its revenue grew, DoorDash also narrowed its net loss to $149 million over the same period in 2020. In 2019, DoorDash had a net loss of $533 million over the nine-month period.
The company said it has 1 million Dashers (delivery workers) and more than 18 million customers. It also had over 5 million customers on its $9.99 per month DashPass service as of Sept. 30. The offering gives customers free delivery from restaurants part of the program.
DoorDash will offer three classes of stock with different voting shares. Class A common stock will grant owners one vote per share. Class B shares will come with 20 votes per share and Class C shares will have no voting rights.
Offering multiple classes of stock has become a common practice in Silicon Valley, especially when the chief executive is also a founder, as is the case with DoorDash’s Tony Xu. The prospectus says Xu and his two co-founders, Andy Fang and Stanley Tang, are expected to enter a voting agreement that would give Xu the authority “to direct the vote and vote the shares” of Class B stock held by his co-founders.
“As a result, Mr. Xu will be able to determine or significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction,” the filing says.
The company seeks to join competitors GrubHub (NYSE: GRUB) and Uber (NYSE: UBER) on the public market. DoorDash has the lead in U.S. market share among them, with 49% of meal delivery sales in September compared with Uber’s 22% and GrubHub’s 20%, according to analytics firm Second Measure.
DoorDash is one of the most hotly anticipated IPOs of 2020. Though the pandemic threw a wrench in many companies’ plans, Airbnb, Roblox and Wish are all expected to go public by the end of the year, CNBC reported Thursday.
DoorDash, whose last private valuation was $16 billion, has raised $2.5 billion.
DoorDash will become the latest gig economy company to go public. The business model has raised questions about worker rights in recent years since gig companies often allow workers to pick up tasks without being full-time employees.
Voters in California last week supported a proposition backed by DoorDash and other gig companies that will allow them to maintain their workers as contractors rather than employees, despite California’s new labor law that aimed to change that. That worker structure helps gig companies like DoorDash and Uber avoid expenses like unemployment insurance and paid time off, though the proposition did provide for some additional protections for workers.
Following the win, Xu indicated that DoorDash would look to spread similar proposals across the country.
The company said one risk factor to its business is failing to “cost-effectively attract and retain Dashers.”
“If we do not continue to provide Dashers with flexibility on our platform, compelling opportunities to earn income, and other incentive programs that are comparable or superior to those of our competitors, we may fail to attract new Dashers or retain existing Dashers or increase their use of our platform,” the filing says. Companies advocating for the California proposition often argued that an employment-based model would undermine their ability to offer flexibility to workers, though labor experts and government officials have dismissed that argument.
DoorDash also explicitly says in the filing, “If Dashers are reclassified as employees under federal or state law, our business, financial condition, and results of operations would be adversely affected.” The company says that reclassification would adversely impact the business due to things like legal injunctions prohibiting them to from using existing business practices, claims for employee benefits and claims of discriminations.
DoorDash also acknowledges in the filing that it has been a target of legal challenges due to its tipping model for Dashers and says the pay model could continue to be a risk. The D.C. attorney general sued DoorDash last year, for example, claiming its former tipping model was “deceptive” because it allegedly led users to believe their tips would go straight to the workers, when it instead offset workers’ guaranteed minimum pay from DoorDash. While it has a new pay model that it said has resulted in more compensation for Dashers, DoorDash said it “may also cause less consistency in earnings across deliveries in some cases.”
Food delivery has been a rare bright spot during the pandemic as consumers avoid restaurants and stay at home, sometimes under local restrictions to contain the virus. GrubHub’s stock, for example, has shot up more than 49% year to date, while the S&P 500 has grown about 9.5%.
DoorDash warned that it may not be able to continue growing at the pace seen during the pandemic.
“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, Total Orders, and Marketplace GOV to decline in future periods,” the company said.
The company also warned that intense competition and the ease and low cost of switching between food delivery options could threaten its business in the future despite its strong position in the U.S. market today.
In his opening letter in the prospectus, Xu laid out his vision for the company beyond food delivery.
Xu said the goal is “to build products that transform the way local merchants do business and enrich the communities in which they operate.”
He lays out three “mutually-enforcing assets” that will facilitate that goal. The first is creating an “on-demand logistics platform” that can direct local delivery of any item, not just food. The second is building out services for merchants that will give them more insight into their own operations to help them grow. And the third is expanding the DashPass from restaurants to other local businesses so consumers can earn benefits wherever they shop with the program.
DoorDash has twice made CNBC’s Disruptor 50 list, which identifies 50 innovative private companies across various sectors.