Olo (OLO) Plunges as its Largest Customer DoorDash (DASH) Accuses It Of Fraud

Shares of the software company Olo (NYSE: OLO) fell 6.7% in early trading Wednesday after its partner and the largest customer, DoorDash (NYSE: DASH), accused the company of defrauding it for years.

DASH claims that Olo had been charging DASH higher fees which then allowed the company to strengthen its position ahead of the recent initial public offering (IPO), which took place on March 17.

This way, OLO allegedly breached the contract signed in 2017. As a result, DASH is “seeking punitive damages for fraudulent concealment and fraudulent inducement.”

Olo has produced a software solution to allow restaurants to manage orders from multiple apps. It earns money by charging a fee to the delivery companies.

DASH claims that Olo committed not to charge higher fees, compared to the rival delivery companies, when it was working to secure DASH as a client. The delivery company found out about these discrepancies last year when it reviewed the terms between Olo and Caviar, which was acquired by DASH in 2019.

The company noted that Caviar’s fees for Olo were “significantly lower” in comparison. If DASH was paying the same fees, it would have paid at least $7 million less since the beginning of the contract. The actual damage could be much higher as Olo didn’t disclose the fees it charged other companies, DASH said in a statement.

“Olo has overcharged DoorDash — inflating its own revenues by collecting from DoorDash tens of millions of dollars more than what DoorDash should have paid,” it is said in a filling.

Ahead of its IPO, Olo acknowledged that DASH is seeking “damages in excess of $7.0 million”, but provided no further details. The software company rejected accusations and said the lawsuit was “without merit”.

The filing also showed that DASH was Olo’s biggest single customer as it accounts for 19.3% of the total 2020 revenue.

Olo called the allegations from DoorDash "baseless".

"Olo has already set forth, DoorDash's allegations are baseless. Despite all of DoorDash's litigation rhetoric, the evidence speaks for itself," the company said in a statement to StreetInsider.com. "Olo will not comment further on ongoing litigation. Olo looks forward to continuing to work with DoorDash for the benefit of the restaurant industry."

(updated 12:22PM ET to add Olo statement)

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