The COVID-19 pandemic has been a boon for tech company shares as lockdown measures for millions of people feed record demand for digital services. And two big names are cashing in on that trend by selling their shares to the public this week for billions of dollars despite not turning an annual profit.
Meal delivery service DoorDash went public on the New York Stock Exchange on Wednesday, selling 33 million shares at $102 US a piece. That values the company at $39 billion US.
DoorDash has quickly become the biggest meal delivery company in the world, providing 543 million meals so far this year. That’s more than $16 billion US worth of takeout to 18 million customer doors — more than twice the amount the company delivered last year.
The San Francisco-based company’s cut of all those takeout orders was almost $2 billion. But despite booming sales, the company continues to lose money, posting a loss of $149 million so far this year. Last year was even worse for DoorDash, losing $667 million on $885 million in sales.
The average DoorDash order was $32.90 this year. The restaurant gets about $20 of that, the driver about $8, and DoorDash’s cut is around 15 to 20 per cent. (Scott Galley/CBC)
That trifling detail isn’t stopping investors from gobbling up shares in the company. At one point Wednesday, their value almost doubled to more than $200 a share on the NYSE.
Vacation rental and travel website Airbnb is poised to do the same on Thursday, with an initial public offering valuing the company at more than $42 billion US. And it, too, has a similar story to tell: booming demand for its services in 2020 has resulted in more than $2.5 billion in revenue, but the company also posted a loss of more than $696 million through the first nine months of the year.
Both companies are cashing in on feverish investor demand for all things technology. Lawyer Kristine Di Bacco with Fenwick & West, a Silicon Valley law firm that works with technology startups and the venture capitalists who want to fund them, says she’s not surprised by investor appetite to take a bite of both.
Despite their lack of profitability for now, “they were strong companies headed into the pandemic and have only accelerated since,” she said in an interview Wednesday.
Both companies were impacted by the pandemic, but in different ways.
DoorDash saw booming demand from people ordering food to their homes. Airbnb saw its usual business of faraway leisure travel crater in March and April when lockdowns were in force, but the company pivoted to cater to growing interest in longer stays for people looking to hunker down within driving distance of their usual homes.
Sky-high valuations have prompted some speculation that tech stocks could be in the middle of a 1999-style bubble, but Di Bacco rejects that notion.
“Unlike the era of pets.com, the companies you’re seeing go public these days are more mature companies from a business perspective,” she said, pointing out that Airbnb has been around for 12 years, and DoorDash for seven.
“There’s also been a number of successful IPOs this year, so all that money is out there to be reinvested.”
Booming market
More than $163 billion has been raised in initial public offerings in the U.S. so far this year, beating the previous record set all the way back in 1999. That zeal for all things tech is buoying just about every company in the space, almost regardless of what they do.
“Valuations in the software and services market have more than fully recovered from the initial COVID shock, with industry tailwinds propelling the sector to all-time-high valuations,” CIBC equity analyst Stephanie Price said in a recent note to clients. “While valuations [have fallen] from peak levels at the start of September, the fall appears to have paused just in time for the IPO market to heat up.”
The so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Google — have all been on a tear since the pandemic began, thanks to booming demand for their digital services from millions of customers who are mostly shut in at home for months on end.
DoorDash has grown quickly and controls about half of the food delivery market in the U.S. (Evan Mitsui/CBC)
It’s not just a U.S. phenomenon either, as Ottawa’s Shopify became the most valuable company in Canada this year, with its shares almost tripling in value since March. The company is now worth almost $170 billion. (For perspective, that’s more than oil company Suncor, CIBC, telecom giant BCE and grocery chain Loblaws combined.)
Shares in Canadian payment processing firm Lightspeed have gone from $10 in March to more than $70 today, while its fellow Montreal startup, Nuvei, quietly pulled off the biggest technology IPO in the history of the TSX earlier this year, going public at $26 a share in September. The company’s value has already more than doubled to $65 a share in barely two months.
Bloomberg Intelligence analyst Mandeep Singh says investor appetite for tech stocks, including this week’s two big IPOs, make sense because they are growing quickly and are poised to continue to do so even after the pandemic ends.
He notes that more than two-thirds of Airbnb’s bookings come from repeat customers, which bodes well for long-term sustainability.
“While Airbnb is yet to be consistently profitable, it’s better positioned for margin expansion due to lower fixed costs from recent job cuts and marketing efficiency gain,” he said.
But not everyone is buying that argument, especially with regards to DoorDash.
Analyst Scott Willis with investment firm Grizzle said the company looked overpriced at its IPO price of $102 a share, and even more so now that it is changing hands at $180 a share as of Wednesday afternoon.
“The media may be hyped, but this offering is looking more like a … pump and dump than a valuable IPO,” he said.
Airbnb shifted its focus during the pandemic away from leisure travel and toward the demand for places to hunker down in during lockdowns. (Yuya Shino/Reuters)
Prior to the pandemic, DoorDash grew from one sixth of the U.S. food delivery market to more than half mainly by slashing fees and spending lots of money on ads to undercut the competition. But the company has spent less than a third of what it normally does on marketing during the global health crisis, since drumming up new business has been easy.
“Once the coronavirus is gone and consumers again can choose between delivery, pickup or a night out, the promotions will have to start back up,” Willis said.
Barry Schwartz, chief investment officer with Toronto-based money manager Baskin Financial, says he isn’t interested in buying shares in either company right now at any price, but that doesn’t mean he thinks they aren’t worthwhile companies.
“Is the valuation absurd? Only time will tell,” he said in an interview. “If in five years they are not profitable or don’t look like they are going to be, then, yeah, they are completely overvalued and people made huge mistakes.”
A fear of missing out on future gains is part of what’s driving investors to buy in while they can, at any price, but despite the lofty valuations both are fundamentally “really high-quality businesses,” Schwartz said.
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
“Communication is one of the most important skills you require for a successful life.” — Catherine Pulsifer, author.
I’m one hundred percent in agreement with Pulsifer, which is why my evaluation of candidates begins with their writing skills. If a candidate’s writing skills and verbal communication skills, which I’ll assess when interviewing, aren’t well above average, I’ll pass on them regardless of their skills and experience.
Why?
Because business is fundamentally about getting other people to do things—getting employees to be productive, getting customers to buy your products or services, and getting vendors to agree to a counteroffer price. In business, as in life in general, you can’t make anything happen without effective communication; this is especially true when job searching when your writing is often an employer’s first impression of you.
Think of all the writing you engage in during a job search (resumes, cover letters, emails, texts) and all your other writing (LinkedIn profile, as well as posts and comments, blogs, articles, tweets, etc.) employers will read when they Google you to determine if you’re interview-worthy.
With so much of our communication today taking place via writing (email, text, collaboration platforms such as Microsoft Teams, Slack, ClickUp, WhatsApp and Rocket.Chat), the importance of proficient writing skills can’t be overstated.
When assessing a candidate’s writing skills, you probably think I’m looking for grammar and spelling errors. Although error-free writing is important—it shows professionalism and attention to detail—it’s not the primary reason I look at a candidate’s writing skills.
The way someone writes reveals how they think.
Clear writing = Clear thinking
Structured paragraphs = Structured mind
Impactful sentences = Impactful ideas
Effective writing isn’t about using sophisticated vocabulary. Hemingway demonstrated that deceptively simple, stripped-down prose can captivate readers. Effective writing takes intricate thoughts and presents them in a way that makes the reader think, “Damn! Why didn’t I see it that way?” A good writer is a dead giveaway for a good thinker. More than ever, the business world needs “good thinkers.”
Therefore, when I come across a candidate who’s a good writer, hence a good thinker, I know they’re likely to be able to write:
Emails that don’t get deleted immediately and are responded to
Simple, concise, and unambiguous instructions
Pitches that are likely to get read
Social media content that stops thumbs
Human-sounding website copy
Persuasively, while attuned to the reader’s possible sensitivities
Now, let’s talk about the elephant in the room: AI, which job seekers are using en masse. Earlier this year, I wrote that AI’s ability to hyper-increase an employee’s productivity—AI is still in its infancy; we’ve seen nothing yet—in certain professions, such as writing, sales and marketing, computer programming, office and admin, and customer service, makes it a “fewer employees needed” tool, which understandably greatly appeals to employers. In my opinion, the recent layoffs aren’t related to the economy; they’re due to employers adopting AI. Additionally, companies are trying to balance investing in AI with cost-cutting measures. CEOs who’ve previously said, “Our people are everything,” have arguably created today’s job market by obsessively focusing on AI to gain competitive advantages and reduce their largest expense, their payroll.
It wouldn’t be a stretch to assume that most AI usage involves generating written content, content that’s obvious to me, and likely to you as well, to have been written by AI. However, here’s the twist: I don’t particularly care.
Why?
Because the fundamental skill I’m looking for is the ability to organize thoughts and communicate effectively. What I care about is whether the candidate can take AI-generated content and transform it into something uniquely valuable. If they can, they’re demonstrating the skills of being a good thinker and communicator. It’s like being a great DJ; anyone can push play, but it takes skill to read a room and mix music that gets people pumped.
Using AI requires prompting effectively, which requires good writing skills to write clear and precise instructions that guide the AI to produce desired outcomes. Prompting AI effectively requires understanding structure, flow and impact. You need to know how to shape raw information, such as milestones throughout your career when you achieved quantitative results, into a compelling narrative.
So, what’s the best way to gain and enhance your writing skills? As with any skill, you’ve got to work at it.
Two rules guide my writing:
Use strong verbs and nouns instead of relying on adverbs, such as “She dashed to the store.” instead of “She ran quickly to the store.” or “He whispered to the child.” instead of “He spoke softly to the child.”
Avoid using long words when a shorter one will do, such as “use” instead of “utilize” or “ask” instead of “inquire.” As attention spans get shorter, I aim for clarity, simplicity and, most importantly, brevity in my writing.
Don’t just string words together; learn to organize your thoughts, think critically, and communicate clearly. Solid writing skills will significantly set you apart from your competition, giving you an advantage in your job search and career.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.
MONTREAL – Politics, public opinion and salary hikes south of the border helped push Air Canada toward a deal that secures major pay gains for pilots, experts say.
Hammered out over the weekend, the would-be agreement includes a cumulative wage hike of nearly 42 per cent over four years — an enormous bump by historical standards — according to one source who was not authorized to speak publicly on the matter. The previous 10-year contract granted increases of just two per cent annually.
The federal government’s stated unwillingness to step in paved the way for a deal, noted John Gradek, after Prime Minister Justin Trudeau made it plain the two sides should hash one out themselves.
“Public opinion basically pressed the federal cabinet, including the prime minister, to keep their hands clear of negotiations and looking at imposing a settlement,” said Gradek, who teaches aviation management at McGill University.
After late-night talks at a hotel near Toronto’s Pearson airport, the country’s biggest airline and the union representing 5,200-plus aviators announced early Sunday morning they had reached a tentative agreement, averting a strike that would have grounded flights and affected some 110,000 passengers daily.
The relative precariousness of the Liberal minority government as well as a push to appear more pro-labour underlay the prime minister’s hands-off approach to the negotiations.
Trudeau said Friday the government would not step in to fix the impasse — unlike during a massive railway work stoppage last month and a strike by WestJet mechanics over the Canada Day long weekend that workers claimed road roughshod over their constitutional right to collective bargaining. Trudeau said the government respects the right to strike and would only intervene if it became apparent no negotiated deal was possible.
“They felt that they really didn’t want to try for a third attempt at intervention and basically said, ‘Let’s let the airline decide how they want to deal with this one,'” said Gradek.
“Air Canada ran out of support as the week wore on, and by the time they got to Friday night, Saturday morning, there was nothing left for them to do but to basically try to get a deal set up and accepted by ALPA (Air Line Pilots Association).”
Trudeau’s government was also unlikely to consider back-to-work legislation after the NDP tore up its agreement to support the Liberal minority in Parliament, Gradek said. Conservative Leader Pierre Poilievre, whose party has traditionally toed a more pro-business line, also said last week that Tories “stand with the pilots” and swore off “pre-empting” the negotiations.
Air Canada CEO Michael Rousseau had asked Ottawa on Thursday to impose binding arbitration pre-emptively — “before any travel disruption starts” — if talks failed. Backed by business leaders, he’d hoped for an effective repeat of the Conservatives’ move to head off a strike in 2012 by legislating Air Canada pilots and ground crew to stick to their posts before any work stoppage could start.
The request may have fallen flat, however. Gradek said he believes there was less anxiety over the fallout from an airline strike than from the countrywide railway shutdown.
He also speculated that public frustration over thousands of cancelled flights would have flowed toward Air Canada rather than Ottawa, prompting the carrier to concede to a deal yielding “unheard of” gains for employees.
“It really was a total collapse of the Air Canada bargaining position,” he said.
Pilots are slated to vote in the coming weeks on the four-year contract.
Last year, pilots at Delta Air Lines, United Airlines and American Airlines secured agreements that included four-year pay boosts ranging from 34 per cent to 40 per cent, ramping up pressure on other carriers to raise wages.
After more than a year of bargaining, Air Canada put forward an offer in August centred around a 30 per cent wage hike over four years.
But the final deal, should union members approve it, grants a 26 per cent increase in the first year alone, retroactive to September 2023, according to the source. Three wage bumps of four per cent would follow in 2024 through 2026.
Passengers may wind up shouldering some of that financial load, one expert noted.
“At the end of the day, it’s all us consumers who are paying,” said Barry Prentice, who heads the University of Manitoba’s transport institute.
Higher fares may be mitigated by the persistence of budget carrier Flair Airlines and the rapid expansion of Porter Airlines — a growing Air Canada rival — as well as waning demand for leisure trips. Corporate travel also remains below pre-COVID-19 levels.
Air Canada said Sunday the tentative contract “recognizes the contributions and professionalism of Air Canada’s pilot group, while providing a framework for the future growth of the airline.”
The union issued a statement saying that, if ratified, the agreement will generate about $1.9 billion of additional value for Air Canada pilots over the course of the deal.
Meanwhile, labour tension with cabin crew looms on the horizon. Air Canada is poised to kick off negotiations with the union representing more than 10,000 flight attendants this year before the contract expires on March 31.
This report by The Canadian Press was first published Sept. 16, 2024.
