Citron calls this the ‘most ridiculous’ IPO of 2020

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“In a year of many interesting IPOs from disruptive data platform Snowflake to leading big data software player Palantir to mobile game engine Unity, there is one IPO that stands out from the rest…” Citron Research wrote in a report Thursday.


The food delivery company’s stock closed Thursday at $154—down 2.4% on the day—following its debut last week. As Danielle Abril wrote in Fortune: “DoorDash is now valued at around $50 billion. That’s more than big established companies like General MillsKraft Heinz, and Ford. Still, DoorDash must prove that its growth during the pandemic was no fluke. Other than a profitable blip in one recent quarter, it has hemorrhaged money for years, losing $204 million in 2018, $667 million in 2019, and, in the first nine months of this year, $149 million.”

The Citron report, from the research arm of the well-known “activist” short-seller, predicts that “this stock should trade to $40 quickly as insiders eagerly await to dump their shares.” They give four reasons:

  • It’s commoditized: There is “zero differentiation” between Uber Eats, Postmates, Caviar, Grubhub, DASH, or any local provider, Citron’s analysts write.
  • It’s competitive: “Even worse, this business model has no brand loyalty as the consumer just picks who will deliver their food for the cheapest price.”
  • It’s expensive: “With DASH direct competitors Postmates, Grubhub, and Uber all trading in a tight valuation range of 3x to 6x sales, DASH is by far the most expensive food delivery company in the world trading at 19x sales.”
  • Its growth has peaked: “These same people that were betting on DASH blindly should have read the company’s S-1, which clearly states that growth has PEAKED: ‘The circumstances that have accelerated the increase in Total Orders stemming from the effects of the COVID-19 pandemic may not continue in the future, and we expect the growth rate in Total Orders to decline in future periods,” they write.

To be sure, Citron Research discloses that Citron Capital may hold a position (long or short) in any security discussed. As activist short-sellers, the fund has a history of taking aim at high-flying companies with sharply critical reports, and profiting as the stock sinks.

But as my colleague Bernhard Warner wrote in Fortune recently, activist shorts have recently gained wider repute on the strength of a number of prescient calls. One recent example? As Warner writes, “On Sept. 10, Hindenburg Research published a 67-page report on Nikola—a huge dump of damning allegations…The opening page set the tone: It included 24 bullet points that poured cold water on the company’s claims that it was developing proprietary battery technology, and that it had cracked the code on cheap hydrogen fuel production.” The report helped expose Nikola to closer scrutiny from other investors, and its share price has tumbled more than 60% since then.

As for what’s in store for DoorDash? Citron’s report simply concludes: “See you at $40.”

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