Uber, DoorDash and other gig-economy stocks fall after US labor secretary says most gig workers should be classified as employees

uber ceo dara khosrowshahi profile 2x1
Uber CEO Dara Khosrowshahi.

  • US labor secretary Marty Walsh said “in a lot of cases gig workers should be classified as employees” in an interview with Reuters on Thursday.
  • Uber, Lyft, Doordash, and Grubhub, along with other firms depending on the “gig economy” labor all fell after the news broke.
  • Walsh said gig workers should have “all of the things that an average employee in America can access,” per Reuters.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Shares of rideshare and delivery companies including Uber, Lyft, Doordash, and Grubhub all fell on Thursday after reports out of Reuters said US labor secretary Marty Walsh believes most gig workers should be classified as employees.

“We are looking at it but in a lot of cases gig workers should be classified as employees,” Walsh said in his interview with Reuters on Thursday.

“These companies are making profits and revenue and I’m not (going to) begrudge anyone for that because that’s what we are about in America… but we also want to make sure that success trickles down to the worker,” Walsh added.

The US labor secretary also said that the Department of Labor will have conversations with companies that employ gig workers in the coming months to ensure they have access to “all of the things that an average employee in America can access,” Reuters reported.

Gig workers are independent contractors who enter into contracts with on-demand companies to provide services to clients.

The last decade has seen an explosion in the so-called “gig economy” with companies like Uber and Lyft fighting to maintain the independent contractor status of their workers.

In March, California voters approved a ballot measure that exempts companies that utilize the “gig economy” from having to treat workers as employees.

The measure freed companies like Uber and Lyft from a 2019 state law that entitled workers to overtime pay, sick leave, and unemployment benefits.

Now, these new comments from the US secretary of labor again call into question the longevity of the gig worker business model.

Walsh noted in his interview that if the federal government didn’t cover gig economy workers during the pandemic, they would “not only have lost their job, but they wouldn’t have had any unemployment benefits to keep their family moving forward.”

Gig workers received a reported $80 million in benefits from the US government during the pandemic, according to an analysis of government data by The Washington Post.

Shares of Uber and Lyft fell as much as 8.34% and 13.67% on Thursday after the news broke, while DoorDash and Grubhub saw their shares fall as much as 11.05% and 4%, respectively.

Read the original article on Business Insider

The New York Stock Exchange is minting crypto art commemorating the first trades of 6 companies that recently went public

NYSE NFT
  • The New York Stock Exchange announced on Monday that it had minted six NFTs.
  • The NFTs represent the first trades of several companies that recently went public on the NYSE.
  • The crypto art pieces are not currently up for sale, but will be gifted to the companies, a source told Insider.
  • See more stories on Insider’s business page.

The New York Stock Exchange (NYSE) announced on Monday that it was getting into crypto art by minting its own digital collectibles designed to commemorate the first public trade of six stocks.

The NYSE is not only the largest stock exchange in the world, but it is also the first to get into crypto art. The collectibles will represent the first trades of Spotify, Snowflake, Unity, DoorDash, Roblox, and Coupang. NYSE said it plans to launch more first-trade collectibles in the future.

The digital collectibles will operate as non-fungible tokens or NFTs. NFTs are digital collectible tokens that allow the buyer to connect their name directly to the creator via the blockchain.

NFTs have boomed in recent months. In February, one crypto art piece sold for nearly $70 million. Since, celebrities and public figures from Twitter CEO Jack Dorsey to singer Shawn Mendes have gotten in on the trend, which has brought in millions for opportunistic creators and resellers of the pieces.

Read more: NFTs, or non-fungible tokens, are the hottest thing in entertainment, art, and crypto right now. Here’s a simple explanation of the craze.

While the NYSE appears to be getting in on the NFT trend, the exchange’s tokens are not up for sale. The NFTs are housed on Crypto.com, a less than month-old NFT trading platform that has already launched crypto art sales for several celebrities including Snoop Dogg and Boy George.

A source familiar with the matter told Insider NYSE does not plan to sell its NFTs, but has already gifted them to the respective companies. The NYSE also plans to mint future NFTs and gift those to the memorialized companies as well, according to the source.

The NFTs for each company feature a short clip containing information about the first trade, including the sale price, date, and a string of numbers representing the first trade quote code.

Stacey Cunningham, the President of NYSE, said the NFTs will help commemorate the very first moments a company joins NYSE by highlighting the data from a company’s very first trade.

“NYSE technology is processing over 350 billion order, quote and trade messages across our markets on our busiest days, more than any other exchange in the world,” Cunningham said in a LinkedIn post. “Only one of those messages marks the NYSE First Trade: the exact moment a company became public, creating an opportunity for others to share in their success.”

Read the original article on Business Insider

Consumer groups ask the FDA to mandate nutritional information on DoorDash and other online delivery platforms

nutrition label
  • The American Heart Association and other groups are asking for nutrition labels on ordering apps.
  • The FDA says restaurants that fall under current labeling rules already list the information online.
  • DoorDash says restaurants can add the information to menus in the app.
  • See more stories on Insider’s business page.

Scientists and consumers groups sent a letter to the Food and Drug Administration (FDA) asking it to require that third-party online ordering services provide nutritional information.

The letter, addressed to FDA director Dr. Susan Mayne, asks the agency to extend existing rules on labeling to platforms like DoorDash, Seamless, and Uber Eats. “Guidance should make clear that both chain restaurants and TPPs (third-party platforms) are responsible for complying with the nutrition labeling requirements,” the letter says.

Read more: We mapped out the ghost kitchens run by ex-Uber CEO Travis Kalanick’s CloudKitchen and competitor REEF Technology. See where the war for ghost kitchen dominance is heating up.

Current FDA labeling regulations apply to restaurants that have 20 or more locations, a spokesperson told Insider.

“FDA recognizes that the dining landscape has changed considerably since the menu labeling requirements were passed into law in 2010, especially with the rise of third-party websites and delivery apps to provide convenient options for ordering to dine at home,” a spokesperson told Insider by email.

“Though many third-party online ordering websites likely would not meet the definition of a covered establishment under our current requirements, and therefore would not be subject to menu labeling requirements, we encourage third-party websites and delivery apps to provide important nutrition information for the menu items offered on their platform. “

The FDA also says that many restaurants available for online include menus with nutritional information. “We encourage consumers to look directly on the restaurant or other covered establishment’s websites for nutrition information for their favorite menu items.”

This isn’t enough for the letter’s signers, which include the American Heart Association, Consumer Reports, Center for Science in the Public Interest, and others.

“For the menu labeling requirements established under the ACA to have their intended impact, consumers must have easy access to the labeled information,” the letter says. It argues that consumers need access to nutritional information at the point of ordering, and many of the benefits of labeling are lost if access involves extra steps.

DoorDash says restaurants can add nutritional information in the description field of menu items.

“We work hard to enable customers to have access to the most up-to-date and accurate menu information, which is why we provide partners on our platform with the ability to enter and edit menu information directly, including nutritional information. We welcome the opportunity to engage with policymakers and stakeholders on this and other important issues impacting our industry.”

Read the original article on Business Insider

A Pennsylvania prosecutor making $60 per hour got demoted because of his DoorDash side gig – where drivers make $17 per hour

GettyImages 1293837008 NEW YORK, NEW YORK - DECEMBER 30: A door-dash delivery driver waits near a restaurant on December 30, 2020 in New York City. The pandemic continues to burden restaurants and bars as businesses struggle to thrive with evolving government restrictions and social distancing plans which impact keeping businesses open yet challenge profitability. (Photo by NEW YORK, NEW YORK - DECEMBER 30: A door-dash delivery driver waits near a restaurant on December 30, 2020 in New York City. The pandemic continues to burden restaurants and bars as businesses struggle to thrive with evolving government restrictions and social distancing plans which impact keeping businesses open yet challenge profitability. (Photo by Alexi Rosenfeld/Getty Images))
  • A Pennsylvania prosecutor was demoted for delivering food for DoorDash during his work hours.
  • His boss called it “indefensible, thoughtless, selfish, and so stupid.”
  • The prosecutor, Gregg Shore, told KYW Radio that his reasons for working for DoorDash were personal.
  • See more stories on Insider’s business page.

District attorneys typically serve citizens by building legal cases against people accused of crimes, but one prosecutor in Bucks County, Pennsylvania, got demoted this week for serving residents food – as a DoorDash delivery driver.

Gregg Shore, who had been second-in-command at the Bucks County district attorney’s office, got caught driving for the food delivery service during hours he was supposed to be doing his job as a prosecutor, KYW Radio reported Thursday.

In 2019, Shore earned $125,435 – roughly $60 per hour – as first assistant district attorney, according to public records.

DoorDash CEO Tony Xu told The New York Times that delivery workers earned an average of just $17 per hour in 2018 – but the company doesn’t pay for the time workers spend waiting to claim orders, and some drivers say the base pay can be as little as $3 per hour.

Shore told KYW Radio that his reasons for working for DoorDash were personal and that he drove mostly at night.

“What he did was indefensible, thoughtless, selfish, and so stupid, it’s senseless,” Bucks County district attorney Matt Weintraub said in a press conference Thursday.

“I don’t know why he did this, only he has the answer, and I’ll admit to you that I’m very angry and I’m upset… this is the reason for his demotion,” he added.

Weintraub said Shore will be demoted to deputy district attorney, adding that while it would be “easier and politically expedient” to fire Shore, it “was not necessarily the right thing to do” given Shore’s otherwise positive track record.

Jennifer Schorn, who had been chief of the office’s trials and grand jury divisions, has been promoted to first assistant to fill Shore’s role, Weintraub said.

During the pandemic, the surge in demand for food delivery has been a boon for executives, early investors, and employees of companies like DoorDash, which opened at $182 per share – 78% above its asking price – during its IPO in December despite an unprofitable business model.

But delivery workers haven’t seen the same benefit, and have long complained about low pay, tough working conditions, and even wage theft – DoorDash paid $2.5 million to settle a lawsuit that accused the food delivery company of stealing drivers’ tips.

Read the original article on Business Insider

A year into the pandemic, Uber and Lyft drivers say gig companies are still failing them. They blame Prop 22.

GettyImages 1218814557 NEW YORK, NY - APRIL 14: A driver pauses as city employees fill-up cars with take-away meals to be delivered to the elderly and those that can not leave their housing due to the coronavirus at a community center in Brooklyn on April 14, 2020 in New York City, United States. The National Guard joined other New York City city agencies in loading up taxi's, Uber's, Lyft's and other 'for hire' vehicles which have joined the effort in delivering meals across the city. New York has been the hardest hit city in the nation from the COVID-19 outbreak. (Photo by Spencer Platt/Getty Images)
Rideshare and food delivery drivers working for companies like DoorDash, Uber, and Instacart have complained the companies aren’t providing PPE or pay for the time it takes them to properly clean their vehicles.

  • Uber and Lyft rideshare and food delivery drivers plan to protest Wednesday at Uber’s headquarters.
  • They say the companies won’t provide PPE or pay them for the time it takes to clean their vehicles.
  • San Francisco supervisor Matt Haney plans to propose a law that would require companies to do both.
  • Visit the Business section of Insider for more stories.

Rideshare and food delivery drivers are planning to protest Wednesday outside Uber’s headquarters in San Francisco, California, over what they say is gig companies’ continued failure to protect them nearly a year into the COVID-19 pandemic.

Drivers for Lyft, Instacart, Uber, and Uber subsidiary Postmates said in a press release announcing the protest that the companies aren’t providing adequate PPE and have refused to pay them for the time it takes to clean their vehicles.

They said that Proposition 22 – an industry-backed law passed in California in November that classified rideshare and food delivery drivers as contractors, excluding them from certain labor protections and restricting the ability of local governments to regulate gig companies – is largely to blame.

“Eleven months into this pandemic and workers are still asking for the most basic life saving protections for themselves, their families and their communities,” Cherri Murphy, a Lyft driver and organizer with Gig Workers Rising, a co-organizer of the protest, said in a statement. 

“It’s really stressful – I’m always being timed when I’m driving for these companies and if I don’t get places quickly, I can be punished. It’s like the companies don’t care about making sure I have enough time to wash my hands, clean my car, and wipe down surfaces,” Lucas Chamberlain, Instacart driver and member of We Drive Progress, another group behind the protest, said in a statement.

Under Prop 22, drivers aren’t paid for the time they spend waiting for Uber or Lyft to find them a ride or delivery order or sanitizing their vehicles in between jobs. Some gig economy researchers have estimated that loophole could allow companies to pay drivers for just 67% of the hours they actually work. 

“Since the COVID-19 crisis began, Lyft has provided tens of thousands of face masks, cleaning supplies and in-car partitions to drivers at no cost to them, and continue to provide access to these supplies today. Our most active drivers also received a free safety kit, consisting of a reusable cloth face covering, sanitizer and disinfectant,” a Lyft spokesperson told Insider, adding that Lyft doesn’t profit off PPE.

Uber told Insider that it has allocated $50 million toward safety supplies for drivers and said it has provided 30 million masks and other cleaning supplies to drivers worldwide.

But while California law requires most companies to provide PPE and sick pay to their employees and to pay into the state’s unemployment insurance program, Prop 22 classified drivers as contractors, allowing gig companies to save far larger amounts by not having to cover those costs. Uber and Lyft drivers last year claimed they’re owed $630 million in back pay as a result of the misclassification. One study found that between 2014 and 2019, the two companies should have paid $413 million into California’s unemployment insurance fund.

Uber spokesperson Kayla Whaling told Insider the company “has tried to do everything we can to support [independent contractors] while they support our communities, including distributing PPE free of charge, providing financial assistance for those who were diagnosed with COVID-19, helping connect them to new work opportunities on Uber or elsewhere, and consolidating information to help them apply for PPP loans or federal unemployment assistance.”

Still, Uber hasn’t always delivered on those promises, and when it has, it’s often only done so following backlash from drivers, regulators, courts, or the media.

Insider reported last April that, despite Uber’s claims it would pay drivers who tested positive for COVID-19, the company had denied legitimate claims and even locked out drivers who requested sick pay.

In July, a federal judge in New York ruled that Uber and Lyft had delayed the state’s ability to pay drivers unemployment benefits because they had played “games” with its requests for earnings data.

Wednesday’s protest – which Gig Workers Rising and We Drive Progress said will include a socially distanced rally – comes as some lawmakers in California are already pushing for more accountability for gig companies who rely on rideshare and delivery drivers.

San Francisco supervisor Matt Haney said he plans to introduce legislation that would require companies like Uber and Lyft to provide PPE and pay drivers for time they spend cleaning their vehicles.

“In the midst of this devastating pandemic, workers have gone above and beyond to protect themselves and our communities by purchasing protective equipment and cleaning supplies and spending their personal time sanitizing their cars to save lives. It is outrageous that while delivery app corporations continue to rake in profits, workers are forced to shoulder these burdens while struggling to make ends meet,” Haney said in a statement.

Do you work at Uber, Lyft, or another food delivery or rideshare app company? We’d love to hear how your company is navigating challenges brought on by the pandemic. Contact this reporter using a non-work device via encrypted messaging app Signal (+1 503-319-3213), email (tsonnemaker@insider.com), or Twitter (@TylerSonnemaker ). We can keep sources anonymous. PR pitches by email only, please.

Read the original article on Business Insider

Amazon-backed food delivery firm Deliveroo is now worth $7 billion after a $180 million pre-IPO funding round

Deliveroo CEO Will Shu
Deliveroo CEO Will Shu at President Macron’s tech summit in France in 2018. Shu said he was the only one who didn’t turn up in a suit.

  • Food delivery firm Deliveroo is now worth $7 billion after raising $180 million in fresh funding.
  • The Amazon-backed company is preparing to go public later in 2021.
  • Insider reported this week that UK-based Deliveroo could be valued at up to $13.6 billion when it floats, with one source pegging April for an IPO date.
  • Visit Business Insider’s homepage for more stories.

Amazon-backed food delivery firm Deliveroo is now valued above $7 billion after raising $180 million in fresh capital.

The new round was led by two of Deliveroo’s existing backers, Durable Capital Partners and Fidelity. Both are investors that put money into public as well as private firms.

UK-headquartered Deliveroo, which has experienced a boom in custom amid national lockdowns, also on Sunday confirmed plans for a stock market debut. The company, though run by American CEO Will Shu, is expected to list on London’s Stock Exchange.

Insider reported earlier this week that an IPO could value Deliveroo at £10 billion ($13.6 billion), and that the firm was potentially eyeing an April float.

That Durable Capital and Fidelity are upping their stakes now signals confidence in Deliveroo’s prospective share price and future growth. As one industry source put it: “Why buy in at $13 billion when you can buy in at $7 billion now?”

The gambit has worked before.

Both Durable Capital and Fidelity invested in Deliveroo’s US equivalent, DoorDash, around six months ahead of its December IPO at an approximately $16 billion valuation. On IPO, DoorDash topped a $32 billion valuation and its market cap now hovers around the $60 billion mark.

Deliveroo is based in the UK and competes with the likes of Uber Eats in Europe and parts of Asia. It does not currently operate in the US. It offers food, alcohol, and grocery deliveries on demand via an app and relies on a network of gig-economy cyclists and motorcyclists to ferry items to customers.

FILE PHOTO: A courier for food delivery service Deliveroo rides a bike in central Brussels, Belgium January 16, 2020. Picture taken January 16, 2020. REUTERS/ Yves Herman
A courier for food delivery service Deliveroo rides a bike in central Brussels

It was founded in 2013 by Shu, formerly an investment banker, and Greg Orlowski. Orlowski left in 2016, and Shu remains the CEO of the business.

An IPO would cap a rollercoaster year for the firm.

As is typical for high-growth, venture capital-backed firms, Deliveroo has been mostly loss-making to date. As the UK, its primary market, went into lockdown in the spring and restaurants shuttered, the firm warned it may collapse.

The situation was exacerbated by the UK’s competition regulator denying Deliveroo access to a large tranche of $575 million in funding, led by Amazon in 2019, on competition grounds. Deliveroo laid off about 300 staffers to reduce costs.

The regulator eventually cleared the funding in April, concluding there was no antitrust threat from Amazon’s involvement. Deliveroo’s business also began to improve as restaurants turned to delivery apps for revenue and consumers upped their takeaway orders, bored of home cooking.

Having initially warned of collapse, Deliveroo towards the end of the year said it became “operationally profitable” in 2020.

Its most recent publicly available financials showed increased revenue for 2019 of $1 billion, a gross profit margin of around 24%, and heavier year-on-year pre-tax losses of $393 million.

Got a tip on Deliveroo? Contact the reporter behind this story, Shona Ghosh, at sghosh@businessinsider.com, shonaghosh@protonmail.com, or +447412061471 for Signal.

Read the original article on Business Insider

Airbnb and DoorDash’s post-IPO stock pops represent an ‘epic level of incompetency,’ says a former banker who led one of the world’s largest IPOs ever

Imran Khan
  • Imran Khan told CNBC on Tuesday that the recent post-IPO stock pops including those of Airbnb and DoorDash represent an  “epic level of incompetency” from the bankers who underwrote the stocks.
  • The former banker, who led Alibaba’s IPO in 2014, said that it’s the job of the bankers to understand the market and price the IPO’s correctly: “Why are you getting paid 5 to 6% if you can’t figure that out?” Khan asked.
  • “When the stock doubles for a very high large market cap company, clearly something didn’t work right here,” he added.
  • Shares of both Airbnb and DoorDash skyrocketed after their public debuts.
  • Visit the Business Insider homepage for more stories.

Imran Khan told CNBC on Tuesday that the recent post-IPO stock pops including those of Airbnb and DoorDash represent an “epic level of incompetency” from the bankers who underwrote the stocks. 

The former banker who led Alibaba’s IPO in 2014 said that it’s the bankers job to understand the market and price the IPO’s correctly. Right now, bankers could be doing a “much better job,” said Khan. Airbnb leaped 115% on its first day of trading-its IPO offering price was $68, but it went on to hit an intraday high of $165. Meanwhile, DoorDash opened at $182 on its public debut, 78% above its initial-public-offering price of $102.

Khan also said that DoorDash and Airbnb were not obscure companies, and that bankers should have known better.

“Why are you getting paid 5 to 6% if you can’t figure that out?” Khan asked.

Read more:A JPMorgan income fund manager shares 12 high-dividend stocks set to gain from a broad cyclical recovery – and unpacks the strategy he uses to beat 93% of his peers

“When the stock doubles for a very high large market cap company, clearly something didn’t work right here,” he added. 

Khan was also the chief strategy officer of Snapchat during its 2017 IPO. SNAP gained as much as 52% on its first day of public trading.

The Verishop founder and CEO said that these that these stock pops are causing investors to lose confidence in the IPO process. He doesn’t think the system of bringing companies to market is broken, but he said bankers could perform better.

“I think when the market gets really busy, a lot of the times bankers get really focused on chasing deals and client management, as opposed to doing their job,” said Khan. 

Read the original article on Business Insider

Uber and DoorDash are hiking food delivery and rideshare prices for Californians to pay for new driver benefits

DoorDash Biker
DoorDash Biker

  • Uber and DoorDash are raising prices on customers in California in order to pay for new driver benefits guaranteed under Proposition 22.
  • Uber will introduce a flat fee between $0.30 and $2, while DoorDash will slightly increase its service fees. 
  • Drivers will still receive substantially fewer benefits under Prop 22 — a law written and bankrolled by Uber, DoorDash, and other gig companies — than they would have been under the state’s gig work law, AB-5.
  • As a result, the companies’ labor costs won’t increase as much, meaning they likely won’t increase prices as much for consumers, at least initially.
  • Visit Business Insider’s homepage for more stories.

Uber and DoorDash are raising prices for customers in California in order to pay for new benefits guaranteed to rideshare drivers and food delivery couriers under a new statewide law that’s set to go into effect this week.

Uber said Monday it’s introducing a flat fee per purchase that will vary based on customers’ location and the service – between $0.30 to $1.50 for rides and between $0.99 and $2 for Uber Eats deliveries.

DoorDash, rather than a flat fee, will roll out slightly higher service fees starting Wednesday, and may adjust certain promotions, such as DashPass, that could also lead to higher prices, a spokesperson told Business Insider.

The surcharges are intended to help cover the costs of minimum earnings, per-mile expenses, healthcare stipends, accident insurance, and other benefits that rideshare and food delivery companies will soon be required to pay workers.

Those perks became enshrined in California law after voters in November passed Proposition 22 – a controversial law that Uber, DoorDash, Lyft, Instacart, GrubHub, and Postmates authored and spent more than $200 million trying to pass.

The law exempts companies from having to provide rideshare and food delivery drivers with basic employment benefits guaranteed to other Californians under the state’s gig work law, AB-5, and denies certain labor protections to those workers.

Read more: California voters approved Proposition 22, keeping ride-share and food delivery drivers as contractors – here’s what that means for companies like Uber, Lyft, Instacart, DoorDash and their workers

That’s a major victory for rideshare and food delivery companies, which were facing substantially higher labor costs under AB-5 – Uber and Lyft gained a combined $13 billion in market value following Prop 22’s passage. Under Prop 22, those companies are required to provide a smaller array of benefits and often at a lower cost than what they would have had to under existing laws. 

For example, drivers will soon be guaranteed 120% of the minimum hourly wage, but they are only paid for “engaged” hours when they have an active ride or delivery, not the hours they spend returning from long trips or waiting for Uber or DoorDash to match them with a job. According to one study, that could result in drivers not being paid for up to a third of their day.

Drivers will also be compensated $0.30 per-mile for vehicle expenses during engaged time, just half of the $0.58 that the IRS estimates it costs to operate a vehicle per mile. Healthcare subsidies are similarly tied to engaged time and lack significant benefits that come with typical employer-based healthcare.

After AB-5 went into effect this year, Uber, Lyft, and other companies refused to reclassify drivers as employees as required by the law, meaning they never provided the benefits it guaranteed.

As a result, while the partial benefits guaranteed by Prop 22 will cost companies less than those guaranteed under AB-5, they are nonetheless new costs the companies hadn’t previously incorporated into their pricing – thus, the new surcharges from Uber and DoorDash.

Uber has yet to turn a profit in its more than 10-year history, and while DoorDash turned a surprise $23 million profit during the second quarter of 2020, the company said that it expected costs to increase and that it “may not be able to maintain or increase profitability in the future,” which may help explain why the companies are passing off part of these new costs to customers.

Read the original article on Business Insider

Airbnb and DoorDash sink as analysts turn skeptical of massive IPO rallies

airbnb ipo nasdaq
The Airbnb logo is displayed on the Nasdaq digital billboard in Times Square in New York on December 10, 2020. – Home-sharing giant Airbnb was set for its Wall Street debut Thursday with a whopping $47 billion valuation amid a feverish rush for new shares in companies adapting to lifestyle changes imposed by the coronavirus pandemic. (Photo by Kena Betancur / AFP) (Photo by KENA BETANCUR/AFP via Getty Images)

  • Airbnb and DoorDash shares fell on Monday after analysts downgraded the newly public companies’ stock.
  • Both firms surged last week as outsized demand pushed prices well above their IPO levels.
  • Gordon Haskett downgraded Airbnb to “underperform” from “buy,” and expects shares to fall roughly 20% from current levels.
  • DA Davidson lowered DoorDash to a “neutral” rating from “buy,” adding that the company’s stock price leaves little room for future error.
  • Watch DoorDash trade live here.
  • Watch Airbnb trade live here.

Airbnb and DoorDash both tumbled on Monday as analysts downgraded ratings following both firms’ colossal public-market debuts.

Airbnb sank as much as 10.1%, while DoorDash plunged 13.6% at intraday lows. The two companies collectively raised $6.7 billion in back-to-back initial public offerings last week, capping a record year for IPOs. Massive demand for the firms’ shares fueled massive gains in their first days of trading, but analysts covering the companies are growing concerned that the stocks climbed above rational trading levels. 

Gordon Haskett changed its rating for Airbnb to “underperform” from “buy” on Monday, eschewing the bullish outlook he held for the firm just one week ago. The home-sharing company’s valuation is “more than stretched” after more than doubling in its Thursday debut, the firm said. Airbnb also trades at two times its estimated gross bookings value, where the average online travel group trades at a 0.6 multiplier, Gordon Haskett said.

The firm lifted its price target to $103 from $77, but the level still implies a roughly 20% drop from current levels.

Read more: Shark Tank investor Kevin O’Leary told us 2 concrete strategies for building wealth over time – and shared how a rude awakening during the pandemic led him to build a new investing app

Separately, DA Davidson downgraded DoorDash to “neutral” from “buy” following the firm’s 86% opening rally. The firm still feels DoorDash deserves to trade at a premium multiple due to its leadership in the food-delivery sector but noted its stock price leaves little room for error.

DA Davidson boosted its price target for DoorDash to $150 from $93. That level implies a slight drop from the stock’s current price. No other analysts have initiated ratings on DoorDash shares. 

Despite the shift in analyst sentiments and Monday losses, both companies still trade well above their IPO prices. Their rallies have fueled new scrutiny of market optimism, with some strategists concerned that the outsized demand for new issuances is a symptom of dot-com-era greed.

DoorDash traded at $157.51 as of 3:10 p.m. ET Monday. Airbnb traded at $129.33.

Now read more markets coverage from Markets Insider and Business Insider:

JPMorgan rolls out a supercharged tech trade designed to amplify gains in stocks like Tesla, report says

The upcoming Fed meeting could shed light on when policymakers will unwind key relief measures

‘We are very confident that the stupid is currently alive and well in this market’: Jeremy Grantham’s heir apparent Ben Inker breaks down how GMO plans to profit from the growth bubble through a new long/short equity strategy

Read the original article on Business Insider

Affirm joins Roblox in delaying its planned 2020 IPO after monster gains from Airbnb, Doordash

affirm installment loan
  • Affirm is delaying its planned IPO until next year, making it the second company in days to put their public debut on hold, according to The Wall Street Journal.
  • The move comes shortly after Roblox decided to postpone its planned 2020 IPO until next year to seek a higher price, given the strong investor demand for high-growth tech IPOs.
  • The recent IPO frenzy has been accelerated by the strong trading debuts of Airbnb and DoorDash earlier this week.
  • Visit Business Insider’s homepage for more stories.

Affirm’s planned 2020 IPO has been put on hold until next year, The Wall Street Journal reported on Saturday, citing people familiar with the matter.

The point-of-sale lender’s decision to postpone its IPO comes shortly after Roblox decided to postpone its planned 2020 IPO until next year to seek a higher price, given the strong investor demand for high-growth tech IPOs.

Affirm planned to begin pitching its shares to potential investors this coming week, and was on track to receive a market valuation of as much as $10 billion, according to The Journal.

Read More: 2 investment chiefs at John Hancock’s $692 billion investing arm say the post-COVID recovery might disappoint in 2021 – but investors can profit with these 3 strategies

Part of the reason Affirm delayed its offering was due to the high price spikes in recent offerings from Airbnb and DoorDash, as well as delays at the Securities Exchange Commission due to a surge in listing requests from private companies, the Journal reported.

Airbnb surged as much as 143% in its first day of trades on Thursday, while DoorDash closed higher by 86% in its first day of trading on Wednesday.

Now, Affirm’s public debut won’t come until January at the earliest, according to the report. 

Affirm and Roblox are attempting to strike a delicate balance of not leaving any money on the table by pricing their IPO at too low of a price, yet also not pricing their shares too high, which might lead to a weak trading debut. Meanwhile, both companies are hoping (and betting on) that the IPO window remains open early next year.

A steep correction in the stock market can occur at any time, closing the IPO window, as that’s not an ideal environment for a private company to go public.

BlackRock CEO Larry Fink believes the recent IPO frenzy is “unsustainable” and could lead to “many accidents.”

Read More: Cathie Wood is beating 99% of fund managers this year. The ARK CEO and her team share their outlooks for 2021 – including thoughts on Tesla’s $5 billion stock sale, the Salesforce-Slack tie-up, and bitcoin’s meteoric rise.

Read the original article on Business Insider