DoorDash sold 33 million shares at $102, as it prepares to start trading Wednesday, Bloomberg reports.
Why It Matters: DoorDash raised roughly $3.37 billion, giving the company a fully diluted value of $38 billion leading up to its public debut. It had previously targeted a range of $90 to $95 and is now the third-largest U.S. listing this year, behind only Bill Ackman’s $4 billion SPAC offering and Snowflake’s $3.86 billion IPO.
Trendsetter: DoorDash is part of a slew of “consumer-facing, web-based businesses that have successfully navigated the coronavirus pandemic and are expected to go public this month.
- Airbnb is set to follow within hours and seeks to raise as much as $3.09 billion.
- Video-game company Roblox, installment loans provider Affirm Holdings and Wish Inc. parent ContextLogic are all slated to IPO in December.
DoorDash has the pandemic to somewhat thank. Covid-19 restrictions have skyrocketed home delivery demand, as well as “investor exuberance over new stock listings” stemming from a new wave of retail investors.
- It tripled revenue in the first nine months of 2020 and narrowed its net loss from last year through an uptick of new customers.
The Final Word: Factoring in DoorDash’s numbers, companies have now “raised more than $160 billion in IPOs on U.S. exchanges this year, an all-time high,” according to Bloomberg data. The number will only push the record higher with the few left before the year’s end.
- DoorDash will trade under the ticker “DASH.”
At $102, or $38 billion, $DASH is valued at 8.8x to 11.5x forward Gross Profit, depending on what you assume forward growth is. Compare this against $UBER trading at 9.6x and $LYFT trading at 7.2x forward Gross Profit.
Given the fact that $DASH has over 200% growth, yet is similarly priced with $UBER, I actually think this one is a good one to take a chance on. My biggest concern is the “return-from-home” trade, when “stay-at-home” stocks may sell off indiscriminately.
The way I would play this is, if the stock popped aggressively in early trading, wait until the afternoon when the stock settles. I am planning on initiating a position if the stock settles at under $140, which represents a valuation under 16x forward Gross Profit for a company that’s doubling or tripling each year.
Fun fact! A couple of my former hedge fund colleagues were able to get into DoorDash stock at a fraction of their valuation in the private markets, obviously making a huge profit since then. I have dreams of opening a fund to allow the Cents community to participate in opportunities like this in the future. All in due time…