A key chart in DoorDash’s IPO filing doesn’t ‘pass the smell test,’ and experts say the delivery giant may need to refile its S-1 to clear it up

  • DoorDash is eyeing a monster IPO that could value the company at up to $32 billion.
  • Paramount to the company’s story is its explosive sales growth, especially among existing customers — a sign of stickiness that bodes well for future profitability.
  • But a key chart in the company’s IPO filing is sending mixed messages about how much business is coming from loyal repeat customers versus new customers who may have joined because of a promo.
  • Experts say the company will likely need to refile an amended S-1 to clarify the chart in question.
  • Visit Business Insider’s homepage for more stories.

Food delivery startup DoorDash revealed this week it’s looking to go public at a mammoth valuation of as much as $32 billion. 

Paramount in justifying that fulsome price tag for investors is the astounding growth the company has achieved, especially among existing customers.

Thanks in large part to the coronavirus pandemic, demand for delivery services exploded this year. Total orders placed with DoorDash over the first three quarters tripled compared with 2019, with consumers spending $16.5 billion, up from just $5.5 billion through the first three quarters of 2019.

Importantly, much of the spending increase comes from repeat buyers, according to DoorDash’s S-1 filing — a critical factor that indicates stickiness and bodes well for long-term profitability.

But as the DoorDash commences its initial public offering road show, a key chart in the company’s registration document that compares order sales from new and existing customers has come under scrutiny, and experts say the company may need to refile its S-1 to clarify the issue. 

Amid the nearly 300-page filing document, some experts have zeroed in on a wonky-looking chart that shows how order sales increased since 2018, distinguishing between the share of gross order value (GOV) coming from existing customers versus new customers. 

DoorDash GOV IPO chart



The chart shows that amid the tremendous spike in consumer orders in 2020, much of the growth came from repeat buyers — the proportion coming from new customers actually shrank from 23% in Q3 2019 to 15% in Q3 2020. 

To investors, a company with a sticky customer base is worth a lot more than a company that has to continually shell out cash to attract users.

While customer traction is important for most startups, it’s especially acute for the food-delivery heavyweights, including Grubhub and Uber Eats, which have waged an expensive battle for market share and drawn skepticism about their paths to profits. 

As DoorDash notes in the filing, nobody expects the massive growth spike in 2020 to continue post-pandemic, so establishing a devoted base of customers is a powerful asset and message to send to investors. 

“The increasing proportion of Marketplace GOV from existing consumers improves our operating leverage as the sales and marketing and promotions spend associated with our existing consumers is significantly lower than the spend associated with new consumers,” DoorDash’s S-1 filing reads.

But the picture presented in the chart doesn’t “pass the smell test,” according to Daniel McCarthy, a marketing professor at Emory University’s Goizueta Business School.

McCarthy, who specializes in valuing companies like Blue Apron and Wayfair based on the lifetime value provided per customer, said in a post on LinkedIn the overall financial picture for DoorDash appears quite strong, including “exceptional repeat buying.”

But the gross order value chart appears to include an error, McCarthy noted, and indicates that new consumers accounted for closer to 22% of order sales, or $1.6 billion, in Q3 of 2020, rather than 15%, or $1.1 billion. That would contradict DoorDash’s narrative around an increasing proportion of order sales from repeat users.

The statistics from prior quarters line up correctly with the chart — it’s only post-Covid periods that appear compromised. 

DoorDash chart Daniel McCarthy

Daniel McCarthy/Emory University; SEC

“The chart is telling us 22%, not 15%. One of those two facts has to be incorrect,” McCarthy told Business Insider in an interview. 

The simplest explanation is that somebody flubbed the chart, but the data points and the broader story DoorDash tells in its S-1 remains intact. 

A DoorDash spokesman declined to comment for this story. Spokesmen for Goldman Sachs and JPMorgan, the lead bankers on the company’s IPO, also declined to comment. 

But the chart is significant not just for the recent growth in consumer loyalty it portrays, but also because it divulges DoorDash’s history of customer acquisitions and gross order value dating back to early 2018. Elsewhere in the filing, the company only discloses the underlying numbers for Q1 2019 onwards, McCarthy said. 

McCarthy said the chart should be corrected or clarified in an amended S-1 filing to provide investors a better sense of these key consumer behavior metrics. 

He’s not the only one.

Jay Ritter, a professor at the University of Florida and expert on IPOs, said refiling the S-1 with clarified data was warranted given the significance of the numbers.

The graph in question is “material in terms of figuring out customer acquisition costs (CAC), life-time value of a customer (CLV), and how much of the total addressable market (TAM) has been reached,” Ritter told Business Insider in an email. “My opinion is that a new S-1/A would be appropriate.”

It may end up being an easy fix with a simple explanation, but the company would likely need to clarify the data in an amended S-1 filing, according to SEC guidelines, which require that “graphic presentations accurately represent their current business” and “are not confusing, do not obscure other prospectus disclosure, or give undue prominence to selected portions of the registrant’s business or operations.”

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