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DoorDash Debuts Amid Mixed Markets; GameStop Setback Hits Stock

By Dan Caplinger - Dec 9, 2020 at 12:02PM

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Stimulus efforts haven't panned out, frustrating some market participants.

One thing that's been a surefire way to get investors stoked about the stock market during 2020 has been talk of the federal government providing economic support for hard-hit Americans. Yet since the election, there's been little progress in finding common ground on Capitol Hill and in the White House, and recent proposals from both sides of the debate have largely gone nowhere. On Wednesday morning, that helped keep stock market benchmarks largely in check. As of 10:30 a.m. EST, the Dow Jones Industrial Average ( ^DJI ) was higher by 12 points to 30,186. The S&P 500 ( ^GSPC 1.53% ) gained 2 points to 3,704, but the Nasdaq Composite ( ^IXIC 1.15% ) dropped 7 points to 12,576.

Market participants have been excited about new companies coming to the stock market, and today, food delivery giant DoorDash ( DASH 2.35% ) is making its debut on the New York Stock Exchange. Meanwhile, for video game retailer GameStop ( GME -1.33% ), the most recent quarter brought some new challenges that sent its stock price sharply lower after its latest financial report.

DoorDash gets a big markup

DoorDash shares didn't immediately trade following the opening bell on Wall Street. It often takes a few hours for popular IPOs to find a balance between buyers willing to pay premium prices to get their hands on shares and those who received allocations in the IPO itself and are willing to sell their stock at the right price.

The company ended up boosting the price it charged IPO participants to buy shares. Having projected an initial range of $75 to $85 per share and then later boosting it to between $90 to $95, DoorDash's offering ended up coming out at $102 per share. That put a market capitalization of nearly $39 billion on the stock.

Delivery person giving another person delivery boxes.

Image source: Getty Images.

Yet early indications suggest even that $102 price left money on the table for DoorDash. As of shortly before 11 a.m. EST, Wall Street pros saw the stock potentially opening between $125 and $130 per share. Whether it'll stay there, climb further, or fall back after the open is uncertain, but for an offering this large, a big boost like that would still be good news for the company.

DoorDash will raise $3.4 billion through its IPO, and that should help it with its growth efforts. The looming question, though, is whether the popularity of food delivery will remain even once the COVID-19 pandemic comes under control. Moreover, with competitor Grubhub having had trouble gaining traction with its own stock offering, some fear that a highly hyped IPO for DoorDash could lead to longer-term disappointment.

GameStop loses a life

Meanwhile, GameStop shares were available for trading right from the open, but shareholders weren't all that happy about it. The stock fell 17% in the aftermath of GameStop's third-quarter financial report, which it released Tuesday afternoon.

GameStop's numbers didn't give investors the happy story they'd hoped to see. Revenue plunged 30% from year-ago levels, with the retailer noting that the coming upgrade cycle in game consoles and the delay in releases of certain high-profile game titles hit the company hard. Comparable-store sales fell nearly 25%, and an 11% reduction in the number of GameStop stores also affected the top line. Even a 257% rise in e-commerce sales wasn't enough to stop the bleeding. Moreover, GameStop lost money during the period, albeit less than its prior-year period losses and less than most had expected.

GameStop also announced a secondary stock offering, with efforts to raise $100 million in new capital. The company continues to pay down debt to strengthen its balance sheet, but the resulting dilution isn't ideal for shareholders.

The only good news was that November looked better for GameStop, with comps jumping 16.5%. However, even a healthy holiday season will still leave unanswered questions for GameStop about its long-term viability in a fast-changing video game industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$170.09 (-1.33%) $-2.29
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,607.88 (1.53%) $69.45
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$15,259.17 (1.15%) $173.70
GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
DoorDash, Inc. Stock Quote
DoorDash, Inc.
DASH
$161.41 (2.35%) $3.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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