Instacart Prices IPO at $30 per Share, Valuing the Grocery Delivery Company at Approximately $10 Billion
Instacart, the grocery delivery company that experienced significant growth during the pandemic, has priced its long-awaited initial public offering (IPO) at $30 per share. This makes Instacart the first notable venture-backed tech company to enter the U.S. public market since December 2021. The offering, which was at the top end of the expected range of $28 to $30 per share, values Instacart at around $10 billion on a fully diluted basis. The IPO involved the sale of 22 million shares, with 14.1 million shares coming from the company itself and 7.9 million shares from existing shareholders. The stock is scheduled to debut on the Nasdaq under the ticker symbol "CART."
Challenges and Market Conditions
In order to attract public market investors, Instacart had to significantly reduce its stock price. In early 2021, during the height of the Covid pandemic, Instacart raised funds at a valuation of $39 billion, or $125 per share, from prominent venture firms and asset managers. However, the tech IPO market has faced challenges since December 2021 due to inflationary pressures and rising interest rates, which led to a decline in the prices of internet and software stocks. The performance of Instacart's IPO, along with other upcoming IPOs like Klaviyo, will determine the willingness of other billion-dollar-plus companies in the pipeline to enter the public market.
Profitability and Competition
Instacart has prioritized profitability over growth, demonstrating that its business model can generate earnings. While its revenue increased by 15% in the second quarter to $716 million, it experienced a decline from the 40% growth seen in the same period the previous year. The company has also faced competition from food delivery provider DoorDash and ridesharing company Uber, both of which have their own delivery services. However, Instacart's main competitors are Amazon and big brick-and-mortar retailers like Target and Walmart, which have established their own delivery services.
Investors and Leadership Changes
Sequoia is Instacart's largest investor, holding a fully-diluted stake of 15%. The firm has seen a significant paper profit on its investment, although the value of the shares it purchased in 2021 has decreased. Instacart co-founder Apoorva Mehta, who owns shares worth over $800 million, is selling a portion of his shares in the IPO. Mehta has been the executive chairman, but with the appointment of ex-Facebook executive Fidji Simo as CEO in 2021, Mehta is resigning from the board. Goldman Sachs and JPMorgan Chase are leading the IPO deal.
In conclusion, Instacart's IPO pricing reflects the company's efforts to navigate the challenging market conditions and competition in the grocery delivery industry. The IPO will provide new opportunities for growth and expansion, while also presenting challenges for Instacart to maintain profitability and differentiate itself from competitors.
Instacart's IPO pricing and entry into the public market could have significant implications for new businesses, particularly those in the tech and grocery delivery industries.
Impact on Market Conditions
Firstly, the successful pricing of Instacart's IPO, despite challenging market conditions, could potentially reignite interest in tech IPOs. This could pave the way for other venture-backed tech companies considering going public, providing them with a benchmark to gauge market reception and investor interest.
Competition and Profitability
Secondly, Instacart's focus on profitability over growth could serve as a strategic model for new businesses. It underscores the importance of sustainable business models that can generate earnings, even in highly competitive markets. However, new businesses must also be prepared to navigate the intense competition from established players in the industry.
In conclusion, while Instacart's IPO offers promising prospects for new businesses, it also highlights the challenges they may face in the public market. New businesses must be prepared to adapt their strategies to changing market conditions, maintain a sustainable business model, and differentiate themselves from competitors to succeed in the increasingly competitive tech industry.