Food delivery giant DoorDash files paperwork to go public

(CNN) DoorDash, the on-demand food delivery company, is preparing to go public at a time when its services are in high demand due to the ongoing pandemic.

The 7-year-old company made public its initial public offering paperwork on Friday, revealing that it has generated $1.9 billion in revenue in the first nine months of this year, ending in September. During that time, it incurred losses of $149 million. During the same period in 2019 it lost $533 million.

However, during the second quarter of this year, amid the pandemic, DoorDash generated a profit of $23 million.

"The pandemic has demonstrated how vital we are to the communities in which we operate," DoorDash said in the paperwork. "With the pandemic, our platform has become a lifeline for merchants whose only revenue options are take-out and delivery, for consumers sheltering in place, particularly vulnerable populations whose health depends on isolating, and for many of the millions of newly unemployed in need of earnings opportunities."

DoorDash said it will list on the New York Stock Exchange under the symbol DASH.

Founded in 2013 by a group of Stanford students as a way to help local businesses with their delivery needs, DoorDash has gone on to raise $2.5 billion to date and was most recently valued at $16 billion.

Crowded delivery space

While the food delivery space is crowded, DoorDash -- which acquired premium restaurant delivery service Caviar in August 2019 -- is the US leader in terms of sales. It surpassed Grubhub for the first time in May 2019, according to analytics firm Second Measure, and remains in that spot. Still, DoorDash notes that US consumers on its platform in September represented less than 6% of overall U.S. population. "We believe we are in the early phases of broad market adoption."

Its competitors in the space include Uber, which operates Uber Eats and newly acquired Postmates, as well as Grubhub, which was acquired by Netherlands-based company, Just Eat Takeaway.com -- and recently announced a partnership with Lyft. The businesses compete on driving down prices to win customers, which can in turn impact financial performance.

While the company is best known for delivering food from restaurants, DoorDash says it mission is loftier than that. It aims to build products that transform how local merchants sell things other than food do business, including through an on-demand logistics platform that can "make possible the delivery of ice cream before it melts, or pizza before it gets cold, or groceries in an hour," as well as merchant services to help businesses with things like customer acquisition and delivery.

It has been diversifying its offerings in recent months by partnering with grocery stores and convenience stores. But new categories come with competitors, too. On-demand grocery delivery company Instacart, for example, recently said it was partnering with Walmart to take on Amazon.

Worker challenges

As with its on-demand economy peers, DoorDash is faces battles over its business model and how it classifies its one million delivery workers -- which it refers to as "dashers" -- as contractors.

DoorDash, along with Uber, Lyft, Instacart and Uber-owned Postmates, recently notched a win in California through the passage of Proposition 22, a ballot initiative paid for by the companies that will allow them to side-step a new California labor law known as AB-5 and to continue treating their drivers as contractors in the state rather than employees.

While Prop 22 does not offer explicit protections for workers such as workers' compensation or unemployment insurance that employees are afforded and therefore is more financially favorable to the employer, it does lays out some new benefit concessions employers must provide for independent contractors.

DoorDash lists the possible reclassification of its Dashers as employees under federal or state law as a risk factor, which could adversely affect its business.

"We have been involved in and continue to be involved in numerous legal proceedings related to Dasher classification," the company said in the filing.

DoorDash acknowledges that its pay model for Dashers is another risk factor that has "previously led, and may continue to lead, to negative publicity, lawsuits, and government inquiries."

The company has caught backlash for a controversial tipping policy for workers, where some tips contributed to their base pay. The policy, which has since been changed, is the subject of a lawsuit brought by DC Attorney General Karl Racine in November 2019 that seeks to recover the "millions of dollars in tips that were used to subsidize DoorDash's payments to Dashers," and impose civil penalties.

At the time, a DoorDash spokesperson called the complaint "without merit."