Shares of DoorDash Inc. slid slightly on their second day of trading, dropping some 7 percent as of approximately noon Eastern Time on Thursday (Dec. 10) to trade at $176.24.
The decline comes a day after DoorDash’s stock surged on its first day of trading, rising more than 85 percent from its $102 initial public offering (IPO) price to finish out the day at $189.51.
“What we are seeing with food delivery is the last frontier of eCommerce, I think. It’s the perfect thing for eCommerce players to come in and aggregate the demand. And DoorDash is right there,” MKM Partners Analyst Rohit Kulkarni said, as reported by CNBC.
But New Constructs CEO David Trainer referred to DoorDash’s market debut as “the most ridiculous IPO of 2020.”
“They do not have a way to make money long-term,” Trainer told Yahoo! Finance shortly after the food delivery firm’s shares started trading. “There’s a lot of competition. And we’re seeing their market share decline. At the end of the day, this business is a race to a zero-margin business, because there’s really no differentiation.”
D.A. Davidson Managing Director and Senior Research Analyst Tom White, however, pointed out that some signs indicate the company will be “able to gradually improve profitability and probably get to 20 percent-plus EBITDA margins here in a reasonable time frame,” per CNBC.
“The pandemic sort of supercharged things for DoorDash, but a lot of those trends were established pre-pandemic,” White noted.
On Wednesday (Dec. 9), Reuters reported, citing an unnamed source, that the District of Columbia’s Attorney General Karl Racine had written a letter ordering DoorDash to stop charging restaurants a 30 percent fee on every order via its DashPass subscription plan. According to the letter, that kind of fee would go against the district’s code that places a 15 percent limit on commissions for third-party food delivery firms.
“While DashPass is a premium marketing offering and provides benefits to many restaurants, we have decided to not charge DC restaurants their contractual DashPass rate at this time. 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,” a DoorDash representative said in a statement, per Reuters.
Restaurants pay more to take part in DashPass “because it gives them greater visibility to these committed customers,” Washington City Paper noted.
