Fidji Simo, CEO of Instacart Inc., speaks during an interview with Bloomberg Studio 1.0 in San Francisco, California, USA, on Thursday, March 3, 2022.
David Paul Morris | Bloomberg | Getty Images
Instacart, the food delivery company that has seen its business boom during the pandemic, priced its long-awaited IPO at $30 per share on Monday and will become the first notable venture capital-backed technology company to reaching the US public market since December 2021.
The offer came in at the high end of the expected range of $28 to $30 per share and values Instacart at about $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 the Nasdaq on Tuesday under the ticker symbol “CART.”
The 11-year-old company, which delivers groceries from chains like Kroger, Costco and Wegmans, had to drastically lower their stock prices to make them attractive to public market investors. In early 2021, at the height of the Covid pandemic, Instacart raised money at a $39 billion valuation, or $125 per share, from prominent venture firms like Sequoia Capital and Andreessen Horowitz, along with 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 scared investors away from risk and led to a decline in the prices of internet and software stocks. Instacart’s performance, along with the debut of cloud software provider Klaviyo, could help determine whether other billion-dollar-plus companies in the pipeline are willing to test the waters.
Instacart 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 early months of the pandemic. The company reduced headcount in mid-2022 and reduced costs associated with customer and buyer support.
Instacart began generating profits in the second quarter of 2022, and in the last quarter it reported $114 million in net income, up from $8 million the year before.
At $10 billion, Instacart will be valued at about 3.5 times 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, 33%, but the company is still losing money. Uber shares trade for less than 3 times revenue. The ride-sharing company’s Uber Eats business is also touted as a competitor to Instacart.
Most of Instacart’s competition comes from Amazon as well as large traditional retailers such as Target It is Wal-Mart, which have their own delivery services. Target acquired Shipt in 2017 for $550 million.
Sequoia is Instacart’s largest investor, with a fully diluted stake of 15%. Although the Silicon Valley company makes a nominal profit of more than $1 billion on its total investment, the $50 million in shares it purchased in 2021 is now worth about a quarter of that amount.
Instacart co-founder Apoorva Mehta owns shares valued at more than $800 million and is selling a small portion of them in the IPO. Mehta has been executive chairman since the company named former Facebook executive Fidji Simo as his successor as CEO in 2021. Mehta is resigning from the board in conjunction with the IPO, and Simo is taking over as chairman.
Goldman Sachs It is JPMorgan Chase are leading the business.
Only about 8% of Instacart’s outstanding shares were floated in the offering, with 36% of those sold coming from existing shareholders. The company said co-founders Brandon Leonardo and Maxwell Mullen are selling 1.5 million each, while Mehta is selling 700,000. Former employees, including those who held executive roles as well as in product and engineering, are selling a total of 3.2 million shares.
TO ATTEND: Klaviyo Follows Instacart in Tech IPO Rounds