In a stunning Wall Street debut, DoorDash soared 86% on its first day of trading on Wednesday to close at $189.51 per share with an initial market cap of around $60 billion.
The meal delivery giant opened the day at $182 per share after pricing its IPO at $102 on Tuesday evening. It sold 33 million new shares for a $3.37 billion IPO haul.
The blockbuster IPO caps a sensational year for DoorDash, which fulfilled 543 million orders in the first nine months of the year, three times the amount during the same period last year. Meanwhile, revenue more than tripled to $1.9 billion in the first three quarters of the year.
“Public market investors still have a lot of appetite for what they perceive as growth companies,” said Cameron Stanfill, a venture capital analyst at PitchBook. “[DoorDash is] really capitalizing on timing. Their business looks really good right now.”
The offering made chief executive officer Tony Xu and his co-founders instant billionaires on paper. At the $102 per share IPO price , Xu’s stake was worth $1.5 billion, with co-founders Andy Fang and Stanley Tang each holding shares worth around $1.4 billion.
“Tony and his team had a vision beyond food,” said Jeff Housenbold, a DoorDash board member and managing partner at SoftBank. “We believe they’re proving the naysayers wrong.”
SoftBank’s stake of 19.8% was worth $6.4 billion at the IPO price. The company invested about $680 million over the course of less than three years to build its position in the company, placing a prescient bet on an industry that many viewed warily.
“When we came in [in 2018], the industry was completely on its back foot,” Housenbold said.
Last year, SoftBank pressured DoorDash and Uber to consider a merger in hopes that consolidation could help the industry to become profitable, the Financial Times reported.
DoorDash’s success is owed in part to a strategy that prioritizes higher-margin suburban markets, said Asad Hussain, an emerging tech analyst at PitchBook. It also has a pulse on the future of delivery, with investments in ghost kitchens and a partnership with self-driving car company Cruise, he said.
DoorDash will face a larger rival following Uber‘s recent acquisition of Postmates. The two companies earned a combined 30% of the monthly meal delivery service sales in October, according to consumer spending data provider Second Measure. DoorDash had around 51% of the market and Grubhub claimed 18%.
DoorDash also continues to rack up losses, although it turned a narrow profit of $23 million in Q2 2020.
Many US restaurants have been hammered by restrictions on in-store dining during the pandemic, leading to the closure of over 110,000 establishments—around 17% of the industry—according to the National Restaurant Association.
Meal delivery apps like DoorDash helped to facilitate a shift to takeout and delivery dining, but they have come under criticism for the fees they charge, which can reportedly total up to around 30% of the order. Cities across the country have started to cap fees on takeout orders.
DoorDash temporarily reduced commission fees early in the pandemic and has committed $200 million to help restaurants, delivery workers and communities.
In November, Delivery and ridehailing companies scored a significant win with the passage of Proposition 22 in California, which exempts them from a law that seeks to classify more part-time workers as employees. DoorDash reportedly spent close to $48 million to promote the ballot’s passage.