DoorDash Shares Open 78% Higher Than IPO Price

San Francisco-based DoorDash has emerged as the leading meal-delivery company by market share in the country, building a lead over Uber Technologies Inc.’s UBER 1.41% Eats service, Grubhub Inc. GRUB 6.17% and other rivals. The company controlled almost half of the U.S. food-delivery market as of mid-October, up from one-third the year earlier.

DoorDash is going public amid a surging stock market and robust gains among technology companies listing their stocks for the first time. So far in 2020, more than $140 billion has been raised on U.S. exchanges, far exceeding the previous full-year record set at the height of the dot-com boom in 1999, according to Dealogic data that date to 1995.

Home-rental startup Airbnb Inc. is expected to price its shares above its already increased targeted range later Wednesday, according to people familiar with the matter, in yet another sign of exuberance in the IPO market.

DoorDash’s opening price of $182 raised the company’s value to roughly $69 billion, giving it a larger market capitalization than Chipotle Mexican Grill Inc., Domino’s Pizza Inc. and Dunkin’ Brands Group Inc. —combined.

DoorDash built up its business in suburban areas, while other delivery firms focused on cities. That strategy paid off during the Covid-19 pandemic, when many people temporarily or permanently left large metropolitan regions for suburban homes and those in smaller cities. It has benefited from families in the suburbs placing large orders and focused on expanding the number of restaurants consumers can choose from on its app.

The pandemic also has resulted in stronger demand for food-delivery companies, as consumers spending more time at home ordering meals from restaurants, many of which had shut their dining rooms. Restaurants, including chains and independent operators, have tapped delivery companies to reach customers, but some have pushed back on fees and costs that delivery companies charge them.

DoorDash has never posted a full-year profit and cautioned prospective investors that a Covid-19-driven growth spurt might not last. For the quarter ended Sept. 30, the company reported a net loss of $43 million on $879 million in revenue, compared with a loss of $152 million on $239 million in revenue for the year-earlier period. Total orders more than tripled in the latest period to 236 million.

The pandemic also has resulted in stronger demand for food-delivery companies, as consumers spending more time at home ordering meals from restaurants, many of which had shut their dining rooms. Restaurants, including chains and independent operators, have tapped delivery companies to reach customers, but some have pushed back on fees and costs that delivery companies charge them.

DoorDash has never posted a full-year profit and cautioned prospective investors that a Covid-19-driven growth spurt might not last. For the quarter ended Sept. 30, the company reported a net loss of $43 million on $879 million in revenue, compared with a loss of $152 million on $239 million in revenue for the year-earlier period. Total orders more than tripled in the latest period to 236 million.

While DoorDash’s pandemic-fueled growth spurt might not last, Chief Executive Tony Xu said scores of people will continue to order food after being drawn into the service during the pandemic.

“Once people get used to a habit, they tend to stick with it. We saw this with e-commerce, we saw this with booking travel over the internet,” he said in an interview ahead of the IPO. 

Mr. Xu expanded into grocery deliveries during the pandemic. He said deliveries become faster during the health crisis, in part because of less traffic on the streets and because DoorDash had become more operationally efficient. 

Like many other Silicon Valley startups, DoorDash’s co-founders have sought to shore up voting control of their company. Mr. Xu will own a special class of stock through which he will have roughly 69% of the voting control of the company. Mr. Xu said that potential investors didn’t ask questions about his voting control.

Earlier this year, DoorDash was privately valued at more than $15 billion. Its valuation continued to grow during the IPO process. DoorDash had been looking to price shares at $75 to $85 each, but then boosted its targeted range to $90 to $95 a share before ending at $102 a share for the IPO.

DoorDash will be the only public stand-alone U.S. food-delivery company after Grubhub Inc. agreed to be acquired in June. Uber Technologies recently bought rival Postmates Inc. for $2.65 billion, in a move aimed at helping it in delivery.

—Preetika Rana contributed to this article.

Write to Micah Maidenberg at [email protected]