- DoorDash is reportedly in talks with banks about opening a line of credit of about $400 million ahead of its initial public offering, according to Bloomberg.
- The company could go public as early as next year, sources told Bloomberg. Obtaining a line of bank credit often comes before a company's decision to file an IPO, Bloomberg said. Companies going public "routinely reward banks that make big credit commitments" with substantial roles in the IPOs before they're filed.
- This reports come on the heels of DoorDash's acquisition of food delivery service Caviar for $410 million in August and a $600 million funding round in May that pushed its valuation to $12.6 billion.
Rumors of an impending DoorDash IPO have been swirling since late last year and this added influx of funds could be a move to further fuel investor confidence in the company. Securing credit is a common practice leading up to an IPO, and the amenable banks are often rewarded by the companies going public, according to Bloomberg.
Confidence in the company could already be high. DoorDash has been on a steep growth trajectory, growing 280% year-over-year. It partners with 90% of the top 100 restaurant chains offering delivery and expanded into 50 states earlier this year. Further, its recent acquisition of Caviar diversifies its restaurant partners, allowing it to work with more local and independent operators.
But there are plenty of reasons for skepticism, too. DoorDash has been under fire lately for its tipping policy, which used tips given to delivery workers through the app to subsidize their base pay.
DoorDash isn't the only delivery company inciting employment concerns. Food delivery service Waitr has been slapped with a lawsuit from former and current drivers, for example, claiming the company paid them below the federal minimum wage. These issues underscore the challenges of operating in a gig economy and add a level of volatility that could make some potential shareholders uneasy.
Then, there's the piece about food delivery companies not being able to turn a profit. Uber, for example, lost more than $5 billion in the past three months alone and remains below its IPO price. Last year, Uber Eats sold nearly $8 billion worth of food deliveries and still faced losses from several of its restaurant partners. This inability to find consistent profitability is an issue affecting most delivery companies, not just Uber Eats.
A $400 million debt offering, however, could better enable DoorDash to appeal to investors as having enough cash to sustain the business until it finds a way to reach a profitable level. Consumers have spoken and it's clear they want delivery as one of their choices, but the true testament to their long-term growth potential will be whether or not investors will continue to choose to back companies that aren't providing much of a return.