- DoorDash is set to go public on Tuesday, but one stock analyst cautioned investors against buying into the food-delivery startup.
- “We think this proposed public equity offering holds no value, $0, beyond bailing out private investors before unsuspecting public investors realize ,” David Trainer, the founder and CEO of New Constructs, said in an email.
- Trainer said he was concerned that it took a global pandemic for the company to turn a profit.
- Though revenue grew by 268% year-over-year in the third quarter, DoorDash might not be profitable in the future, especially after a coronavirus vaccine sends more people back to restaurants, Trainer said.
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DoorDash’s initial public offering “holds no value,” and the company may never be profitable, said David Trainer, the CEO and founder of New Constructs.
The food-delivery startup upped its IPO price range to $90 to $95 a share in a filing on Friday after initially targeting $75 to $85. The new target means DoorDash is now seeking to raise as much as $3.1 billion in its public debut on Tuesday.
It could be one of the largest US tech IPOs of the year, though Trainer branded it “the most ridiculous IPO of 2020.”
The veteran Wall Street analyst said that DoorDash’s last private valuation was only $16 billion and that its pre-IPO stage reflected the “overblown fervor of the work-from-home theme.”
“We think this proposed public equity offering holds no value, $0, beyond bailing out private investors before unsuspecting public investors realize the business is not viable in its current form,” he said in an email.
Trainer added that the company would need to grow its share of the competitive global food-delivery app market to over 56% from roughly 16% over the trailing 12 months to justify its valuation.
DoorDash’s revenue grew by 268% year-over-year in the third quarter of 2020, but Trainer cautioned investors against expecting further growth, especially if a swiftly deployed coronavirus vaccine sends people back into restaurants.
“It took a global pandemic to drive the firm’s one quarter (ended June 30, 2020) of GAAP profitability. The firm has not been profitable since, and we think it may never be,” he said.
“Investors should take DoorDash’s GAAP numbers with a grain of salt,” Trainer added. “The company disclosed a material weakness in its internal control over financial reporting in its S-1. This disclosure means DoorDash didn’t have adequate technology and processes in place to ensure the accuracy of its financial statements and increases the odds that DoorDash will need to restate its financials in the future.”
Trainer also pointed out that DoorDash publicly filed for its IPO on November 13, a few days after Pfizer announced its vaccine was found to be over 90% effective at preventing COVID-19.
“We think DoorDash’s current investors and bankers recognize that the window of opportunity to IPO this terrible business closes quickly when the threat of COVID-driven lockdowns no longer drives growth in food delivery demand,” the analyst said.
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