Instacart Inc. Fiji Simo, Chief Executive Officer, speaks during a Bloomberg Studio 1.0 interview in San Francisco, California, U.S., Thursday, March 3, 2022.
David Paul Morris | Bloomberg | Good pictures
Instacart, the grocery delivery company that saw its business grow during the pandemic, on Monday priced its long-awaited IPO at $30 a share, becoming the first significant venture-backed tech company to hit the US public market since December 2021.
The offer came at the high end of an expected range of $28 to $30 per share and values Instacart at $10 billion on a fully diluted basis. 22 million shares were sold in the IPO, 14.1 million from the company and 7.9 million from shareholders. The stock will debut on the Nasdaq on Tuesday under the ticker symbol “CART.”
The 11-year-old company, which offers groceries from chains including Kroger, Costco and Wegmans, had to dramatically lower its stock price to attract public market investors. In early 2021, at the height of the Covid pandemic, Instacart, major asset managers Fidelity and T. Along with Rowe Price, it raised money from major venture capital firms like Sequoia Capital and Andreessen Horowitz at a valuation of $39 billion, or $125 per share.
The tech IPO market has been closed since December 2021 as inflationary pressures and rising interest rates drove investors away from risk, leading to a slump in the prices of internet and software stocks. Instacart’s performance will help determine whether other billion-dollar-plus companies in the pipeline are willing to test the waters, along with the upcoming launch of cloud software vendor Clavio.
Instagram has sacrificed growth for profitability, proving its business model can generate revenue. Revenue increased by 15% Second quarter At $716 million, it was down 40% from the previous year’s growth and 600% in the early months of the pandemic. The company also plans to cut headcount by mid-2022 and reduce costs associated with customer and shopper support.
Instacart began receiving revenue in the second quarter of 2022, with net income of $114 million in the most recent quarter, up from $8 million a year ago.
At $10 billion, Instacart would be worth about 3.5 times annual revenue. Food delivery provider DoorDash, which Instacart names as a competitor in its prospectus, trades at 4.25 times earnings. DoorDash’s revenue grew 33% in the most recent quarter, but the company is still losing money. Uber’s stock trades for less than 3 times earnings. The ridesharing company’s Uber Eats business has also been named as an Instacart competitor.
Much of Instacart’s competition consists of its own delivery services, including Amazon and large brick-and-mortar retailers such as Target and Walmart. Target acquired Shift in 2017 for $550 million.
Sequoia is Instacart’s largest investor, with a 15% fully diluted stake. While the Silicon Valley company is sitting on a paper profit of more than $1 billion on its total investment, the $50 million in shares bought in 2021 is now worth a quarter of that amount.
Instacart co-founder Apoorva Mehta owns more than $800 million worth of stock and is selling a small portion of it in an IPO. Mehta has been the executive chairman since the company Appointed Former Facebook executive Fiji Simo will take over as CEO in 2021. Mehta resigns from the board with the IPO and Simo takes over as chairman.
Goldman Sachs and JPMorgan Chase are leading the deal.
Only about 8% of Instacart’s outstanding shares were issued in the offering, with 36% of those sold coming from existing shareholders. The company said co-founders Brandon Leonardo and Maxwell Mullen will sell for 1.5 million each and Mehta for 700,000. Former employees, including those in executive roles and those in manufacturing and engineering, totaled 3.2 million in sales.
See: Clavio follows Instacart in tech IPO down rounds