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DoorDash Stock Soars After Initial Public Offering

SAN FRANCISCO — Wall Street loves a pandemic winner.

Shares of DoorDash soared in their first day of trading on Wednesday, capping a year of outsize growth for the country’s largest food delivery company. DoorDash stock rose 86 percent above its initial public offering price of $102 to close the day at $189.51.

That valued the company at $72 billion, including employee-owned shares — more than the market capitalization of Domino’s Pizza and Chipotle Mexican Grill combined. DoorDash raised $3.4 billion, making it the one of the largest I.P.O.s of the year.

Investors piled into the stock despite DoorDash’s deep losses and the intensely competitive market in which it operates. In the week before it went public, DoorDash raised its proposed price range 16 percent to $92.5 per share at the midpoint before pricing even higher. The pandemic has been a boon to the company, as people turned to delivery services while stuck in their homes.

Tony Xu, the chief executive of DoorDash, said the company would try not to “chase the scoreboard” and the stock market hype as a public company. “I recognize the significance of the milestone and the moment, but it is one day on this multidecade journey,” he said.

DoorDash’s listing heralds a banner week of public offerings for technology start-ups. Airbnb priced its offering on Wednesday at $68 a share, according to people with knowledge of the matter. The home rental company had raised its offering price range once, in the face of high demand, and could be valued at $47 billion, far above its $18 billion valuation in the private market this year. It will begin trading on Thursday.

The e-commerce start-up Wish, the video gaming company Roblox and the real estate start-up OpenDoor also plan to list their shares before the end of the year. The events are set to deliver windfalls to the companies’ founders, employees and investors in what is expected to be the busiest year for I.P.O.s since 1999. More than 200 companies valued at more than $50 million have gone public so far this year, according to Renaissance Capital, which tracks I.P.O.s.

Many of these companies lose money. Even so, investors have largely given them warm welcomes as they go public. Private investors valued Snowflake, a data warehousing company, at $12 billion before it went public in September. Since then, its valuation has soared to $107 billion.

“It’s been 20-plus years since we’ve seen this many I.P.O.s,” said David Hsu, a professor of management at the University of Pennsylvania. But he added a cautionary note about the enthusiasm. “At some point, we do have to look at some fundamentals,” he said.

DoorDash’s debut also shows the extreme economic disparities created by the pandemic. Restaurants, struggling to survive government-mandated closures, have increasingly relied on delivery apps like DoorDash to stay in business.

The apps, which dispatch armies of gig workers to pick up and deliver orders, charge fees that some restaurant owners have said are onerous. In many cases, takeout orders have not made up for the lost revenue of indoor dining. Chains including Ruby Tuesday, California Pizza Kitchen and the parent company of Chuck E. Cheese have gone bankrupt this year.

But DoorDash has thrived. In the first nine months of the year, its revenue more than tripled from the same period last year, to $1.92 billion. Orders surged to 543 million through September, compared with 181 million a year earlier.

Ahead of its I.P.O., DoorDash announced a $200 million pledge to various programs to help restaurants and delivery drivers. It invited a number of restaurant owners and delivery drivers to virtually attend the stock market opening bell ringing and featured them in outdoor marketing campaigns around New York and San Francisco.

Despite its rapid growth, DoorDash is burning cash. It lost $149 million in the first nine months of the year and warned investors that the pandemic-spurred growth was likely to slow down.

Mr. Xu said the company would continue to spend money to grow “commensurate with the opportunity.”

Mr. Hsu said DoorDash’s “astonishing” valuation made him think investors had overemphasized the effects of the pandemic.

“When you get to this market cap level, there are questions about where do you go from here?” he said.

DoorDash recently won a long-fought battle over its use of contract workers. Last month, Californians passed Proposition 22, a ballot measure that exempts DoorDash, Uber, Lyft and others from a state law that would have required them to treat their drivers as employees. The companies are expected to push for similar rules in other states.

DoorDash has grown, in part, by focusing on suburban markets and partnerships with large chain restaurants. Founded in 2013 by Mr. Xu, Stanley Tang, Andy Fang and Evan Moore, it survived a ruthlessly competitive market for longer than many of its competitors. This year, two players, Grubhub and Postmates, were acquired by larger rivals.

Through the deal-making, DoorDash has remained independent. It counts one million drivers and 18 million customers in the United States, Canada and Australia.

The company has experimented with different business models, including a subscription service, DashPass, which costs $9.99 a month for unlimited deliveries. DashPass has five million subscribers.

DoorDash began operating commissary buildings where restaurants can rent space and prepare food specifically for deliveries. It has struck partnerships with grocers, pet food companies and drugstores. The company even invested in Burma Bites, a local restaurateur.

The succession of tech I.P.O.s provides long-awaited returns to venture capital investors. Many of the companies going public are a decade old. Plentiful venture funding has allowed “unicorn” start-ups, worth $1 billion or more, to put off going public, and with it the pressure to turn a profit, for as long as possible.

Sequoia Capital, which has backed Airbnb, DoorDash, Snowflake and several other sizable start-ups going public this year, is expected to reap a bonanza. So is Founders Fund, a venture firm that is a large shareholder in Airbnb and Wish. And the Japanese conglomerate SoftBank, which was bruised by bad bets on the office rental company WeWork and others, could be redeemed by its investments in DoorDash and OpenDoor.

Matt Phillips contributed reporting.