Delivery giant DoorDash Inc is planning to launch an IPO (Initial Public Offering) to maximise its profits from the global trend of consumers turning to app-based delivery of almost everything they need, as they prefer staying at home than venturing out and risking contracting a lethal virus.
Recently, the delivery chain filed papers for an IPO. In its reasons for doing so, the company has stated that the pandemic has induced an accelerated growth for e-commerce and remote delivering apps, driving big and small businesses into the convenience sector, consequently making it a profitable sector to invest in. The company is therefore inviting public investors to inject capital into the delivery chain for mutual profits reaped from the present trend.
Retail giants and delivery apps are raking in the profits thanks to the shift of consumer preference to doorstep delivery, and they have grown both in revenue and valuation. However, DoorDash has only faced losses since its founding. Although DoorDash has welcomed public investors, it has also warned investors of initial losses as the company plans to increase its spending before regular profits come in for itself as well as investors.
The delivery chain said that the increased expenditure will be for expanding its platforms, developing new services for its platforms, widening its reach to new regions and geographies, and increasing the intensity of its sales and marketing campaigns. As the delivery platform has suffered losses in millions, the plans pf expanding its reach and services will take major funds from the IPO and investors cannot expect early and fast profits from the venture.
The company’s decision to float an IPO came after Proposition 22 was passed that allowed companies to treat drivers as contractors instead of employees. Till now, drivers and delivery boys were seen as employees and were availing employee benefits such as sick days and overtime. The new rules help the delivery companies to cut costs by treating drivers as contractors and extending limited benefits to the delivery boys and drivers. Had Proposition 22 not been passed, DoorDash would have suffered under the pandemic, even after acquiring public investors. Thus, Proposition 22 has been a positive development for the delivery company.
DoorDash was founded in 2013 and has more than 18 million customers in the US, Canada and Australia and claims to have captured more than 50% of the food delivering market in the USA. However, the delivery company believes that it needs to aggressively expand in order to keep up with its competitors who have acquired strategic agreements with working partners for future. The management of DoorDash is aiming at making money next year along with its competitors. According to DoorDash, the profits in the food delivery sector have grown two to three times since the pandemic and the company will be able to transform its luck if it plays its cards properly.