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DoorDash Considers Direct Stock Listing Instead of IPO

Candy Cheng

(Bloomberg) -- DoorDash Inc., the unprofitable food delivery company, is weighing a direct stock listing for its planned entry into the public markets as soon as next year, rather than holding an initial public offering, according to two people familiar with the matter.

By listing directly, DoorDash would be able to go public without the scrutiny that comes with an investor roadshow but wouldn’t raise money by issuing new shares. The move is still desirable because it lets existing shareholders—some of whom have been sitting on equity for years—sell their stock.

DoorDash has yet to file with U.S. regulators for its listing and remains undecided on the path to take, said the people, who asked not to be identified discussing private information. The direct listing option is appealing to DoorDash executives because they think the company can get money through other means, one of the people said.

Just last week, DoorDash got $100 million from investment accounts advised by T. Rowe Price Group Inc. The company has also talked with banks about arranging a credit facility of about $400 million. JPMorgan Chase & Co. is leading that potential financing and is also advising DoorDash on the public stock sale, people with knowledge of the matter have said. Spokeswomen for those companies declined to comment.

DoorDash has been in talks with Goldman Sachs Group Inc. about working with the bank on a direct listing, according to two people familiar with the matter. Goldman Sachs declined to comment.

Direct listings are rare but have become a popular topic of conversation among tech companies in the last year. They’re a byproduct of an abundance in capital available in the private markets, creating less of a need to raise money through an IPO. Spotify Technology SA was the first high-profile company to go through the process last year, and Slack Technologies Inc. followed this year. Airbnb Inc. is also leaning toward a direct listing and would be the largest tech company to take the unconventional approach.

Meanwhile, the IPO process has been particularly unforgiving this year to deeply unprofitable companies, like Lyft Inc. and Uber Technologies Inc. WeWork was forced to abandon its IPO and take a bailout from its largest investor, SoftBank Group Corp., when Wall Street rejected the company’s pitch on the roadshow.

DoorDash has raised about $2 billion from investors, including SoftBank and Sequoia Capital, most recently at a valuation of $12.7 billion. It uses gig-economy labor and faces similar risks as Lyft and Uber. DoorDash was embroiled in a controversy over drivers’ tips this year, which it addressed partially by increasing pay to workers. However, the issue lingers. The attorney general in Washington, D.C., sued DoorDash on Tuesday, alleging the company pocketed customers’ tips to reduce labor costs.

Critics have also said DoorDash fortified a lead in the U.S. by spending cash at an unsustainable pace. Tony Xu, DoorDash’s chief executive officer, told Bloomberg this month that the business is designed to eventually be profitable. “We have a lot of money in the bank,” Xu said. “We are in no rush to spend it all.”

Venture capitalists in Silicon Valley organized a summit last month to tout the benefits of direct listings. At the closed-door event, Benchmark’s Bill Gurley, Sequoia Capital’s Michael Moritz and other VCs argued against IPOs. Xu was among the executives in attendance.

(Updates with details in the fifth paragraph. )

--With assistance from Crystal Tse, Michelle Davis and Michael Hytha.

To contact the author of this story: Candy Cheng in San Francisco at ccheng86@bloomberg.net

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Mark Milian

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