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Instacart shares jumped 40% in their Nasdaq debut Tuesday, opening at $42, following the grocery delivery company’s long-awaited IPO.
Monday night’s bid at $30 per share valued Instacart at about $10 billion on a fully diluted basis, down from a private market valuation of $39 billion at the height of the Covid pandemic. in early 2021. The opening price brought its valuation to around $14 billion. .
Instacart is the first notable venture-backed company in the United States to go public since December 2021, and its performance is closely followed by VCs and late-stage startups awaiting the return of investors’ appetite for risk. The Nasdaq has rebounded this year after a dismal 2022, but companies that went public before the economic downturn are still trading at a steep discount from their peak prices. Software developer Klaviyo is expected to hit the market soon.
Founded in 2012, Instacart delivers groceries from chains including Kroger, Costco and Wegmans, and has had to significantly lower its stock price to make it attractive to public market investors. In early 2021, as consumers were stuck at home and burdened with delivery orders, Instacart raised funding at $125 per share from top venture capital firms like Sequoia Capital and Andreessen Horowitz, as well as large managers assets Fidelity and T. Rowe Price.
Instacart has sacrificed growth for profitability, a move necessary to preserve cash and attract investor interest. 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 is valued at about 3.5 times its annual revenue. Food delivery provider DoorDash, which Instacart named 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.
Only about 8% of Instacart’s outstanding shares were tendered in the offering, with 36% of those sold coming from existing shareholders.
“We felt it was really important to give liquidity to our employees,” CEO Fidji Simo told CNBC’s Deirdre Bosa in an interview. “This IPO is not about raising money for us. Rather, it is about ensuring that all employees can have liquidity in the stocks that they work very hard to build. We were not looking for a window of perfect market.”
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.
For Instacart, this offering netted more than $420 in cash, adding to the nearly $2 billion in cash and equivalents the company had on its balance sheet at the end of June.
WATCH: Instacart CEO says IPO is about giving employees cash
