Instacart's IPO values the company at $9.9 billion, a steep plunge from the $39 billion it got in a funding round 2 years ago

The San Francisco-based company sold 22 million shares for $30 each on Monday, according to a statement. Instacart and current shareholders had offered the shares for $28 to $30, a range that was elevated after chip designer Arm Holdings Plc rose 25% in its trading debut Thursday after the year’s biggest IPO.

At the IPO price, Instacart has a fully diluted valuation of $9.9 billion. That’s a steep plunge from its $39 billion valuation in a 2021 funding round when its business boomed amid pandemic lockdowns, but still ranks it as one of the biggest companies to go public this year.

Instacart’s listing combined with Arm’s is also giving equity capital markets much-needed relief after the longest drought since 2009 in the depths of the financial crisis. As a venture-backed consumer startup, success in its trading debut could pry open the IPO market for other companies looking to go public.

Klaviyo, Birkenstock

Marketing and data automation provider Klaviyo Inc. is planning to sell its shares Tuesday, with German footwear maker Birkenstock Holding Ltd. also preparing to list.

Even with Instacart’s IPO and Arm’s $5.23 billion listing, which now includes so-called greenshoe shares, only about $21 billion has been raised this year on US exchanges, according to data compiled by Bloomberg. That’s finally catching up with the $22 billion at this point last year but still less than a 10th of the $250 billion total for the period in a record-setting 2021, the data show.

Pricing Decision

Instacart decided earlier Monday to price its shares at $30 or more, Bloomberg News reported. Like Arm, which also considered pricing its shares above the marketed range, Instacart chose in the end not to exceed the offered terms.

Taking another cue from Arm, Instacart had also lined up big investors to support its listing. PepsiCo Inc. is buying $175 million of Instacart’s preferred convertible stock. It has also enlisted Norway’s Norges Bank, TCV, Sequoia, D1 Capital Partners LP and Valiant Capital Management as cornerstone investors that could take up to 60% of the shares, according to its prospectus.

Instacart’s largest investors include Sequoia Capital and D1 Capital Partners, according to the filing. Other investors have included Tiger Global Management and Coatue Management, according to PitchBook.

The IPO is being led by Goldman Sachs Group Inc. and JPMorgan Chase & Co., with Bank of America Corp., Barclays Plc and Citigroup Inc. also participating along with 15 other underwriters.

Instacart, which is incorporated as Maplebear Inc., sold 14.1 million shares in the IPO, with existing stockholders selling 7.9 million, according to the statement. The company’s shares are set to begin trading Tuesday on the Nasdaq Global Select Market under the symbol CART.

Founded in 2012, Instacart has faced a rapid slowdown in the growth of its core business in the wake of the pandemic and has been searching for new ways to make money.

Advertising Boost

Orders on its platform rose 18% to almost 263 million in 2022 but were virtually flat in the first half of 2023 compared with a year earlier, Instacart said in its filings. The company was able to become profitable in 2022, thanks in part to a boost in revenue from advertising, which now accounts for nearly a third of the company’s total revenue.

Despite a flattening of orders, gross transaction value increased 4% to $14.9 billion for first half of the year. Instacart is also managing to keep more profits from each order. Net income grew as a percentage of gross transaction value, with a profit of 1.5% in 2022 replacing a loss of 0.3% in 2021.

Instacart Chief Executive Officer Fidji Simo, a Facebook product veteran, took over from co-founder Apoorva Mehta two years ago and has helped Instacart move beyond grocery delivery to focus more on behind-the-scenes technology, taking advantage of the voluminous amount of consumer data it collects to help grocery stores sell more. Simo has reconfigured Instacart’s business model and fleshed out the company’s portfolio of products that it can sell to grocers, from analytics software to fulfillment services, promises of 15-minute delivery and advertising platforms.

By outfitting brick-and-mortar supermarkets like Kroger Co. and Wegmans with e-commerce tech, coupled with Instacart’s existing footprint online, Simo is betting the company will grow whether people are perusing the app at home or hand-picking tomatoes in the store.

The company has also explored tapping new income streams such as catering and stocking food for small- and midsize businesses like preschools and corporate offices, as well as a health-care focus to deliver food and nutritional programs through hospitals, medical providers and insurers.

While Instacart still commands the lion’s share of the market for large orders, over $75, DoorDash Inc. has been making significant market share gains on orders under $75, Instacart’s filings show. DoorDash, which went public in 2020, has a market value about $31 billion. Instacart also competes with Uber Eats and Amazon.com Inc.’s grocery delivery service that includes Whole Foods, and Walmart Inc.’s growing e-commerce capabilities.