By Sandhya Anand
Following the gig economy trend, Doordash is speeding to deliver an IPO. Will this recover the company’s huge losses and questionable payment practices?
As with every delivery app in the food and beverage industry, DoorDash increased its revenue for more than 200% in 2020 than for the same period of 2019. The company operates in the US, Canada and Australia and claims to have more than 18 million active users of the platform. The company also stated that 5 million users use the $9.99 DashPass subscription service but did not specify how many of those users were under free trials.
However, this doesn’t hold up with the company’s long history of losses and poor ethical payment methods. The losses were slightly reduced this year to $149m against $1.9bn revenue earned in the third quarter as compared to the huge losses of $533m lost against $587m in revenue during the third quarter of last year. There was a record of $1.6bn in cash and cash equivalents held at the end of September 2020.
Last year, DoorDash co-founder Tony Xu was intensely criticised for his blatant disregard and borderline illegal treatment of delivery workers. The company used customer tips to make the minimum payment towards their workers instead of the tips being an additional compensation or a perk to each employee for their good service.
It’s one of the companies in the ‘gig economy’ alongside Uber and Lyft that fought against the California Assembly Bill 5. Interestingly, Uber Eats and Doordash had discussed a merger last year at the request of their common shareholder, SoftBank’s Vision Fund. Both were left unsatisfied with the discussion and ultimately decided to scrap the idea. However, in line with this new IPO, the talks may be still on the table.
“It’s clear from recent feedback that we didn’t strike the right balance. We thought we were doing the right thing by making Dashers whole when a customer left no tip. What we missed was that some customers who *did* tip would feel like their tip did not matter.” announced Mr. Xu on Twitter after he was criticised for taking advantage of his workers and duly made a change in policy.
The current tip policy guarantees the delivery person a minimum payment rather than using the tips to offset the amount of their payment.
On the heels of this turbulent history DoorDash has reported filing its initial public offering. It’s backed by SoftBank’s Vision Fund. It aims to be valued at more than $20 billion in the IPO and plans to start trading next month. It will list under the symbol “DASH” in the New York Stock Exchange. According to the Second Measure, DoorDash is market leader, competing against Uber Eats, Postmates,Grubhub and other regional players. They also clearly prefer to follow a traditional method rather than a direct listing as preferred by Slack and Spotify.
“The number of shares to be offered and the price range for the proposed offering have not yet been determined,” stated DoorDash.
SoftBank Vision fund owns nearly a quarter of DoorDash’s Class A common stock as compared to Sequoia Capital that owns nearly one fifth. Goldman Sachs and JP Morgan serve as the leading underwriters on the offering.
Photo by Jon Tyson, Unsplash