Fidji Simo, CEO of Instacart Inc., speaks during an interview with Bloomberg Studio 1.0 in San Francisco, California, United States, Thursday, March 3, 2022.
David Paul Morris | Bloomberg | Getty Images
Instacart, the grocery delivery company that has seen its business boom during the pandemic, on Monday priced its long-awaited IPO at $30 per share and will become the first notable venture-backed technology company to list. American public market since December 2021.
The offer is at the high end of the expected range of $28 to $30 per share and values Instacart at approximately $10 billion on a fully diluted basis. There were 22 million shares sold in the IPO, with 14.1 million coming from the company and 7.9 million from existing shareholders. The stock is expected to debut on Nasdaq on Tuesday under the symbol “CART.”
The 11-year-old company, which delivers groceries from chains including Kroger, Costco and Wegmans, had to significantly lower its stock price to make it attractive to investors on the public markets. In early 2021, at the height of the Covid pandemic, Instacart raised funding at a valuation of $39 billion, or $125 per share, from leading venture capital firms like Sequoia Capital and Andreessen Horowitz, as well as as large asset managers Fidelity and T. Rowe Price.
The technology IPO market has been largely closed since December 2021 as inflationary pressures and rising interest rates have kept investors away from risk and caused prices of internet and software stocks to fall. Instacart’s performance, along with the upcoming debut of cloud software provider Klaviyo, could help determine whether other billion-dollar-plus companies in the pipeline are ready to test the waters.
Instacart has sacrificed growth for profitability, proving in the process that its business model can generate profits. Revenue rose 15% in the second quarter to $716 million, down from 40% growth in the year-ago period and about 600% in the first months of the year. pandemic. The company reduced its workforce in mid-2022 and reduced costs associated with customer support and buyers.
Instacart began generating profits in the second quarter of 2022 and in the most recent quarter reported net income of $114 million, up from $8 million a year earlier.
At $10 billion, Instacart will be valued at about 3.5 times its annual revenue. Food delivery provider DoorDash, which Instacart names as a competitor in its prospectus, trades at 4.25 times revenue. DoorDash’s revenue last quarter grew faster, at 33%, but the company continues to lose money. Uber shares trade at less than 3 times earnings. The ride-hailing company’s Uber Eats business is also named as a competitor to Instacart.
Most of Instacart’s competition comes from Amazon as well as large brick-and-mortar retailers, like Target and Walmart, which have their own delivery services. Target acquired Shipt in 2017 for $550 million.
Sequoia is Instacart’s largest investor, with a fully diluted 15% stake. While the Silicon Valley company has a theoretical profit of more than $1 billion on its total investment, the $50 million in shares it purchased in 2021 are now worth about a quarter of that. Rising.
Instacart co-founder Apoorva Mehta owns shares worth more than $800 million and is selling a small portion of it in the IPO. Mehta has served as executive chairman since the company named former Facebook executive Fidji Simo to succeed him as CEO in 2021. Mehta resigns from the board in connection with the IPO and Simo assumes the role of president.
Goldman Sachs and JPMorgan Chase are leading the transaction.
Only about 8% of Instacart’s outstanding shares were tendered in the offering, with 36% of those sold coming from existing shareholders. The company said co-founders Brandon Leonardo and Maxwell Mullen each sold 1.5 million, while Mehta sold 700,000. Former employees, including those in management positions as well as in product and marketing areas engineering, sold a total of 3.2 million shares.
WATCH: Klaviyo follows Instacart in tech IPO rounds
