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-- DoorDash sold shares at $102 a piece in its IPO, above its range of $90 to $95, according to people familiar with the matter.
-- Revenue at the the food delivery company jumped 268% in the third quarter to $879 million.
-- DoorDash has been one of the biggest beneficiaries of the coronavirus pandemic, which forced restaurants to close their dining rooms and move to delivery.
A DoorDash Inc. delivery person places an order into an insulated bag at Chef Geoff’s restaurant in Washington, D.C. Andrew Harrer | Bloomberg | Getty Images -----------------------------------------------
DoorDash, the food delivery provider that’s seen a surge in demand during the coronavirus pandemic, sold shares in its IPO at $102 a piece, pricing above its range, according to people familiar with the matter.
The offering on Tuesday values the company at $32.4 billion, based on common stock outstanding and $38.7 billion on a fully-diluted basis. The company previously said it expected to sell shares at between $90 and $95. The sources asked not to be named because the pricing is still confidential.
While a wide swath of software and internet companies have gotten swept up in the Covid-19 rally, few have experienced the kind of growth seen by DoorDash. Revenue in the third quarter surged 268% from a year earlier to $879 million, following growth in the second quarter of 214%. Through the first nine months of 2020, DoorDash’s order volume climbed to $16.5 billion from $5.5 billion a year earlier.
DoorDash, based in San Francisco, makes money by charging a commission to participating restaurants that can reach 30% of an order as well as a fee of a few dollars per order from consumers. DoorDash said in its prospectus that 390,000 merchants are now on the platform. That includes everything from fast food chains like Chick-Fil-A, Chipotle and McDonald’s to upscale restaurants that were forced to close their doors earlier this year and switch to takeout and delivery.
The company, which ranked 12th on CNBC’ Disruptor 50 list for 2020, has been able to cut its losses this year, but still reported a net loss for the first three quarters of $149 million, down from $534 million in the same period of 2019. DoorDash at least makes money on every order now, recording a so-called contribution margin of 23% through September, compared with a negative margin of 32% a year earlier.
DoorDash controls about 50% of the U.S. food delivery market, well ahead of rivals Uber Eats and GrubHub. The biggest overhang for the company may be uncertainty about what the business looks like in a post-Covid world, especially with a widespread vaccine rollout expected by mid-2021.
Should consumers return to eating out instead of relying on delivery, DoorDash could see business deteriorate. Meanwhile, restaurants, which tend to operate on very low margins, are constantly seeking ways to keep their costs down, and there’s technology on the market to help them accomplish that without relying on third-party apps.
As DoorDash warns in its prospectus, “The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 pandemic may not continue in the future, and we expect the growth rates in revenue, Total Orders, and Marketplace GOV to decline in future periods.”
DoorDash CEO Tony Xu co-founded the company in 2013, in Palo Alto, California, where the service reached its first customers. Xu currently owns just under 5% of the company’s outstanding shares. SoftBank, which l ed a $535 million investment in 2018, is the largest shareholder with about 20% stake, followed by Sequoia, which owns 16%.
-- Shares of DoorDash, a leading food delivery app, started trading on the New York Stock Exchange on Wednesday.
-- The stock began trading at $182 per share.
-- The company trades under the symbol “DASH.
-- ”The IPO kicks off a busy season for market debuts. Airbnb is set to go public Thursday, while Roblox and Wish are expected to go public by the end of the year.
Shares of DoorDash, a leading food delivery app, surged in its market debut on the New York Stock Exchange on Wednesday.
The company priced its shares at $102 a piece Tuesday night, above its range of $90 to $95. The stock began trading at $182 per share, giving it a market cap of $57.8 billion.
DoorDash, founded in 2013, now joins its competitors GrubHub and Uber at a key time. Food delivery has been a bright spot during the coronavirus pandemic, with people limiting their time outside of the home as much as possible.
DoorDash reported $1.9 billion in revenue for the nine months ended Sept. 30, according to its IPO filing. That’s up from $587 million during the same period last year. As its revenue grew, DoorDash also narrowed its net loss to $149 million over the same period in 2020. In 2019, DoorDash had a net loss of $533 million over the nine-month period. In its prospectus, DoorDash said more than 390,000 merchants use the app.
The company, which ranked No. 12 on the 2020 CNBC Disruptor 50 list, trades under the symbol “DASH.” Goldman Sachs and J.P. Morgan are the lead underwriters for the offering, while SoftBank is the largest shareholder with about 20% stake, followed by Sequoia, which owns 16%.
Wednesday’s public offering kicks off a busy season for market debuts. Airbnb is set to go public Thursday, followed by e-commerce Wish next week and fintech company Affirm and kids’ video game maker Roblox this month. DoorDash has attracted scrutiny from the attorney general of the District of Columbia on more than one occasion.
It recently reached a $2.5 million settlement with the AG’s office after facing allegations that it misled consumers on how tips would be allocated to workers. DoorDash has denied the allegations but changed its tip model since the period of time the AG cited in the lawsuit.
More recently, the DC AG’s office confirmed to CNBC it had sent a cease and desist letter to DoorDash on Tuesday, warning it to suspend plans to charge commission on its DashPass service that would exceed a fee cap set by the District.
The DC Council recently passed a law that would cap third-party delivery and pick-up service fees at 15% of the order price during a public health emergency. The Washington City Paper reported last week that restaurants were informed they would begin being charged the original rate in their contracts for DashPass, which is a premium service for frequent users in which restaurants pay to participate.
According to the notice reported by the City Paper, DoorDash told restaurants the legislation “is only applicable to Classic orders and does not apply to the DashPass program.”
In a statement Wednesday, a DoorDash spokesperson told CNBC it had decided not to charge restaurants their contractual rates for DashPass, for the time being, citing “confusion as a result of our response to the unintended consequences of the pricing regulations in Washington, DC.” They maintained DashPass is a “premium marketing offering.”
“We look forward to engaging with local policymakers to increase understanding of the impact pricing regulations have, and solutions that better serve customers, Dashers, and restaurants,” the spokesperson said.
-- CNBC’s Lauren Feiner contributed to this report.
This story is developing. Please check back for updates.
Anyone else thinking DoorDash is the perfect company to short?
Unemployment surges. Covid cases at all time high expected to surge to worse levels. A no deal Brexit seems certain. Trade wars. Deficit spending through the roof. Stock market near all time highs. And DoorDash IPOs with a Market Cap of 70 billion dollars... a company with no proprietary tech, no barriers to competition, plenty of well financed competition, no profits, no expectations of profits. They deliver burgers. -----
And eventually the pandemic will be over.
Peer-to-Peer, Gig and On-Demand Economies | Stock Discussion ForumsShare
Food-delivery platforms in Europe are offering couriers extra benefits in the hope of averting costly legislation on employment rights
By Adam Clark Wall Street Journal Dec. 30, 2020 8:14 am ET
An Uber Eats worker stands by the Spanish Steps in Rome. Gig-economy companies are hoping a labor deal struck in Italy can provide a model elsewhere. PHOTO: ALBERTO PIZZOLI/AGENCE FRANCE-PRESSE/GETTY IMAGES -----------------------
BARCELONA—Gig-economy companies in Europe, under pressure over employment rights, are looking to strike labor agreements that give workers some benefits but stop short of making them employees.
Uber Technologies Inc. and Amazon.com Inc.-backed Deliveroo are among a number of food-delivery businesses seeking to secure deals with workers and unions in the hope of averting legislation that could force them to treat delivery drivers as employees, potentially upending their business models.
The effort follows several legal judgments across Europe challenging the companies’ view that drivers and couriers are independent contractors.
In the U.K., Uber is appealing to the Supreme Court to overturn an earlier decision that drivers using its app effectively work for the company, while Swiss courts have forced Uber Eats to stop using independent contractors in the Geneva area. Instead it has started using third-party employees, a first for the company.
An Uber Eats rider collects an order in London, where the company is fighting a legal decision that effectively classified its workers as employees. PHOTO: DAVE RUSHEN/SOPA IMAGES/ZUMA PRESS ---------------------- Gig-economy companies say reclassifying workers as employees would add to costs, reduce workers’ flexibility and result in lost jobs. Following the Geneva move, Uber said only 300 couriers were given contracts, costing 1,000 others their jobs.
Instead the companies are championing a recent labor agreement with a small right-wing union in Italy as an alternative. Under a deal agreed in September, a group of companies including Uber and Deliveroo promised couriers in Italy €10 per hour spent making deliveries, equivalent to about $12, as well as equipment and insurance. That’s above the typical €7 an hour minimum wage but comes without holiday pay or sick leave.
The companies struck the deal, which covers all of their food-delivery workers in the country, after the Italian government threatened to regulate the sector. The companies say the deal doesn’t add to costs for their customers.
Larger unions have said the deal leaves workers worse off than if they were treated as employees, but it remains in force. The companies say they are interested in pursuing similar arrangements elsewhere, including in France and Spain.
While Uber and Lyft Inc. offered drivers in California modest benefits after winning a state vote to keep workers as independent contractors, the Italian deal goes further by introducing collective bargaining for independent contractors.
President-elect Joe Biden has said he wants to introduce collective bargaining for contractors, and the Independent Drivers Guild—a New York-based drivers’ group—called for states to offer such arrangements to gig workers following the California vote.
In Europe, the next battleground is Spain, where the government hopes to finalize a new gig-economy law in the coming weeks. The companies are pushing an Italy-style deal that would avoid workers being reclassified as employees.
The industry also backed government proposals in France to introduce charters of agreed working conditions, while ruling out full employment rights.
“We do believe gig workers should have access to more social rights but not necessarily under a strict labor regime,” said Sacha Michaud, cofounder of Barcelona-based delivery app Glovoapp23 SL, which operates as Glovo across Europe and in parts of Africa.
In Spain, Glovo, Deliveroo and Uber say they are willing to offer workers a deal that would pay minimum rates—plus bonuses for working in bad weather—but doesn’t include benefits such as paid vacation.
Deliveroo said it wanted to improve social protections for workers in Spain and elsewhere, without risking their flexibility.
]Delivery workers in Malaga, Spain, protest for greater inclusion in debates over the country’s new gig-economy law. PHOTO: JESUS MERIDA/ZUMA PRESS -------------------- Some delivery drivers are supporting the companies’ efforts in Spain.
“We want to work as independent contractors and have the flexibility to work as many hours as we want,” said Badr Eddine Hilali, head of the Asociación Autónoma de Riders (Autonomous Riders’ Association), a couriers’ group that works with the platform companies. “A contract of 40 or 30 or 20 hours doesn’t interest me.”
Others say the companies pose a false choice between flexibility and employment.
“The Italian model is what the companies want because it offers them more benefits and less for the workers,” said Dani Gutierrez, a spokesman for Riders X Derechos (Riders for Rights), an independent couriers’ group that supports employment status for couriers.
“‘Flexibility’ is what they say you have. We don’t work when we want, we work when they let us, which is very different,” Mr. Gutierrez said, referring to the lack of guaranteed minimum work and the pressure to work evenings and weekends.
Gig-economy companies in Europe may struggle to avoid their workers being classified as employees unless they change their business models or can show couriers enjoy genuine freedoms of self-employment, said Valerio De Stefano, a labor-law professor at the Belgian university KU Leuven. This could include providing more transparency around their algorithms and financial data on labor costs, he added.
European countries often have labor protections incorporated at a constitutional level, which could hamper efforts to carve out a new category of independent contractors in the law, he said.
A friend of mine posted a video of a delivery vehicle bringing his order from a restaurant on Castro St. in Mtn View. He lives a few blocks away. You have to go out to get the food as it doesn't dance up to your door and ring the bell.
My thought was people, kids, homeless, crooks, etc. will jump on and ride those and wait for them to open up to get what is inside.
Arm those robots with with something to prevent that.... they might be very useful for private security, especially with how the SF DA lets criminals out with a cookie these days.
Peer-to-Peer, Gig and On-Demand Economies | Stock Discussion ForumsShare
Albertsons is laying off employees and replacing them with gig workers, as app platforms rise By Eli Rosenberg The Washington Post Jan. 6, 2021 at 4:11 p.m. CST
The grocery chain Albertsons is laying off delivery workers and replacing them with gig and contract workers, a change that labor advocates and union representatives say is a direct result of the new California law that companies such as Uber, Lyft and DoorDash sponsored last year.
It declined to give an estimate of how many positions would be affected but said workers would be offered the ability to continue to work.
The news about Albertsons’s grocery brands Vons and Pavilions, which was first reported by Los Angeles news site Knock, was greeted with a chorus of outrage from liberals and labor advocates in California, who have long warned that Prop. 22, the ballot proposition that gave gig companies the ability to deny workers protections such as the state-mandated minimum wage and overtime by classifying them as contractors and not employees, would result in job losses and give employers even more incentive to limit the compensation and benefits available to workers.
“This is exactly what we were afraid of when app companies started pushing for a special carve-out from labor laws,” said Caitlin Vega, a labor advocate who works closely with California’s legislature. “If you create a subcategory that has fewer rights and wages, you’re going to shift from traditional employment to this new category of work. And that’s going to worsen the inequality that we already face.”
Albertsons declined to comment on whether its decision was influenced by Prop. 22.
“This decision will allow us to compete in the growing home delivery market more effectively,” the company said in a statement. “Since the COVID-19 outbreak, our eCommerce business has risen to new heights and has become more strategically important to Albertsons Companies.”
Unionized delivery workers will not be laid off in the shift, Albertsons said.
Some of those workers are insulated by a contract that protects them in some ways from encroachment from gig and contract workers.
“In the process of doing organizing and negotiations, the issue of use of third-party apps was a huge issue with our members,” said Jim Araby, an official with a chapter of the United Food and Commercial Workers in Northern California, which helped unionize workers at some Safeway stores in the Bay Area in 2019 (Albertsons owns Safeway).
The delivery workers his union represents make $17 to $22 an hour, have access to employer-paid health insurance, vacation time, sick time and 401(k) benefits, and do not have to use and maintain their own vehicles for their work, he said.
DoorDash, meanwhile, does not count the time workers spend in between deliveries; workers protected by minimum-wage requirements have this time counted, making wage comparison impossible. The company said its workers make an average of $22 an hour nationwide when not counting this downtime. Drivers are also eligible for some health insurance subsidies through the Affordable Care Act when they work 15 hours or more a week, DoorDash spokesman Taylor Bennett said.
Albertsons’s decision had nothing to do with Prop. 22, Bennett said in a statement. He didn’t offer any more details.
“DoorDash has always supported local economies, and as e-commerce and delivery have become even more important for many businesses during these challenging times, we remain committed to helping brick-and-mortar local merchants reach consumers with the best of their neighborhood,” Bennett said.
The move adds fuel to the debate over the future of work that has been unfolding in California — and being watched closely around the country — in recent years.
In 2019, legislators in California passed a bill, AB5, that sought to crack down on worker misclassification — the practice whereby companies classify workers as contractors instead of employees to avoid higher labor costs associated with the category. The bill applied to workers across industries but was written specifically to address misclassification at gig companies such as Uber and Lyft. The companies have long argued their workers are self-employed and thus do not merit extra protections.
Contractors are not entitled to protections such as minimum-wage requirements, overtime rules, workers’ compensation should they get injured on the job, and unemployment insurance, while employees are.
Uber, Lyft and DoorDash helped bankroll a more than $200 million ballot initiative in 2020 to thwart the California bill, formally exempting them from classifying their workers as employees, arguing that their proposal would help empower workers who enjoy being contractors.
The experience of Albertsons workers should serve as a warning for the future of employment across the country if app-based companies continue to find ways around labor laws, labor advocates say.
“It comes as no surprise that these kind of business models are going to be drawn on by more and more companies who are seeking lower labor costs and being released from basic workplace standards and responsibilities,” said David Weil, a former Labor Department official and Brandeis University professor who is an expert on worker-classification issues. “More and more delivery drivers will lose the protections and benefits of employment and be required to work in these independent contractor setups where they’ll be paid less, exposed to greater risks on the job and have no access to basic social protections like unemployment insurance.”
For Democratic legislators in California who had lost their battle against some of Silicon Valley’s powerful players, the news about Albertsons’s layoffs amounted to an “I told you so” moment.
“We warned that this was an effort of corporations to replace good middle-class jobs with jobs with no protections,” said Southern California Assemblywoman Lorena Gonzalez, a Democrat. “And we have exactly that today. We have workers making minimum wage along with health-care benefits and from that to a situation where those jobs are being done by people making sub-minimum wage with no health care and no protections, period. It’s what happens when we allow corporate greed to go unfettered.”
Prop. 22 gave companies confidence that they could contract out work that was previously reserved for employees with secure pay and benefits, without facing the risk of being sued for misclassification, said Chris Benner, a University of California at Santa Cruz professor who has studied app-based delivery work.
“The fact now that they [Albertsons] are moving to this model, except for a small subset of their delivery workers who are unionized in the Bay Area, just underscores the problematic nature of this sort of insecure delivery work,” he said.
The FTC alleged that Amazon failed to pay its Flex drivers the full amount of tips they were owed, amounting to a deceptive business practice. | Photo: Chip Somodevilla/Getty Images ---------------------------------
Gig economy companies know that President Joe Biden's Labor Department is going to be a problem for them. But the FTC's commissioners are signaling that they hope to take on the Ubers and Lyfts of the world, too, using any authority they have to defend workers being harmed by the notoriously opaque gig economy.
The FTC's settlement with Amazon over its Flex tipping practices on Tuesday marks a new chapter for the agency, which has not historically taken serious action against gig companies or in defense of workers. But in its complaint, the FTC alleged that Amazon failed to pay its Flex drivers the full amount of tips they were owed, amounting to a deceptive business practice.
Amazon agreed to pay $61.7 million to refund the drivers, a small price tag for a company that just reported its first $100 billion quarter. But beyond the dollar amount, the settlement is a serious signal to the gig companies that the Biden administration will scrutinize their business practices from all angles, and the FTC may be their next opponent in the upcoming regulatory wars.
Acting FTC Chairwoman Rebecca Slaughter told reporters that the case shows that the FTC under her leadership will bring "cases that tackle today's pressing problems."
"Here that means not only protecting consumers but also workers in the fast-growing area of the gig economy," she said, calling it an "an important step in ongoing work to ensure that companies who use gig workers treat them fairly and honestly."
And outgoing FCC Commissioner Rohit Chopra ripped the agency for its historically "lax approach to worker abuse." "Despite broad pronouncements about a commitment to policing markets for anticompetitive conduct that harms workers, the FTC has done little," he said. "I hope that today's action turns the page on this era of inaction."
A litany of gig companies, including DoorDash, Postmates and Shipt, have been accused of misleading their workers about how much they receive from tips and silently tweaking their algorithms in order to pay lower wages. It's an area that's ripe for regulatory intervention, experts said.
"There's been a lot of allegations of questionable practices in the gig economy space, and so I certainly expect the FTC to continue to try to be more aggressive," said Justin Brookman, the director of technology policy for advocacy group Consumer Reports.
Slaughter declined to say whether the FTC is investigating other companies. But she said that the agency is taking those concerns seriously. "Misrepresentations having to do with income and compensation, however they fall, whether they be tips or base wage or otherwise, could be within the scope of the FTC Act's ban on deceptive acts and practices," Slaughter said.
It's not the first time the FTC has taken on a gig economy company, Republican FTC Commissioner Noah Phillips was quick to point out. Uber in 2017 agreed to pay $20 million to settle accusations that the ride-hailing company misled drivers about the amount they could make. And those efforts are only set to accelerate over the next few years.
Similar battles have been playing out across the country. DoorDash last summer changed its tipping policy following a public outcry over revelations that it was using customers' tips to subsidize payments to delivery workers. And Instacart similarly changed its tipping policy after facing pressure from a group of senators, who urged the FTC to investigate "tip-baiting."
And the FTC could expand those inquiries into the secretive algorithms controlling delivery workers' pay. "The FTC could use its power to go after corporations that have considerable economic power and use it to suppress wages or increase," said Laura Padin, a senior staff attorney with the National Employment Law Project.
The FTC's commissioners are also using the opportunity to push Congress to expand its authority — specifically, they want to dole out bigger fines the first time a company is caught deceiving consumers or workers. There's some scuffling among the FTC commissioners about how that could play out; outgoing Democratic FCC Commissioner Rohit Chopra says the FTC already has the authority while Slaughter and Phillips argue Congress needs to intervene. With Democrats controlling both chambers and the White House, that intervention is likelier than ever.
Ultimately, the Department of Labor and National Labor Relations Board will play a key role in determining the most consequential question at the center of gig work debates: whether workers should be classified as employees, with access to the full range of benefits under U.S. law, or contractors.
"The fundamental change here that needs to be made probably can't come from the FTC because it relates to the way these workers are classified and the rights and protections they have because of that classification," Padin said.
But the knowledge that a government agency is investigating their tipping and business practices could scare some gig companies into changing how they operate. "Before, it was very unregulated," said Lindsey Cameron, an assistant professor at the University of Pennsylvania's Wharton School. "They could do what they wanted to do. Now there's more eyes looking at them from all different directions."