DoorDash’s initial public offering (IPO) “holds no value,” and the company may never be profitable, the CEO and founder of New Constructs said.
In a filing on Friday, the food-delivery startup increased its IPO price range to $90 to $95 a share from an initial target of $75 to $85. The new target means DoorDash is now seeking to raise as much as $3.1 billion in its public debut on Tuesday.
It could be one of the largest US tech IPOs of the year, though Trainer branded it “the most ridiculous IPO of 2020.”
The veteran Wall Street analyst said that DoorDash’s last private valuation was only $16 billion and that its pre-IPO stage reflected the “overblown fervor of the work-from-home theme.”
DoorDash’s revenue rose 268% YoY in the third quarter of 2020, but Trainer cautioned investors against expecting further growth, especially if a swiftly deployed coronavirus vaccine sends people back into restaurants.
For the first nine months of this year, revenues soared to a whopping $1.92 billion, compared to $587 million over the same period in 2019. The company has continued to post net losses, but so far this year, they have come to -$149 million, up from -$533 million in 2019.
“It took a global pandemic to drive the firm’s one quarter (ended June 30, 2020) of GAAP profitability. The firm has not been profitable since, and we think it may never be,” Trainer said.
“We think this proposed public equity offering holds no value, $0, beyond bailing out private investors before unsuspecting public investors realize the business is not viable in its current form,” he said in an email quoted by Business Insider.
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The company would need to grow its share of the competitive global food-delivery app market to over 56% from roughly 16% over the trailing 12 months to justify its valuation he said. Adding that “Investors should take DoorDash’s GAAP numbers with a grain of salt.”
Trainer noted that DoorDash publicly filed for its IPO on November 13, a few days after Pfizer announced its vaccine was found to be over 90% effective at preventing COVID-19.
“We think DoorDash’s current investors and bankers recognize that the window of opportunity to IPO this terrible business closes quickly when the threat of COVID-driven lockdowns no longer drives growth in food delivery demand,” the analyst said.
Tony Xu, Evan Moore, Andy Fang and Stanley Tang co-founded the company back in October 2012. As of today, DoorDash has more than 390,000 merchants, 18 million customers and one million Dashers. There are operations in the U.S., Canada and Australia.
By: Ifunanya Ikueze
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