Instacart opens on Nasdaq at $42 in IPO

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Instacart shares soared 40% in their Nasdaq debut on Tuesday, opening at $42, following the grocery delivery company’s long-awaited IPO.

The offer late Monday at $30 a 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 raised its valuation to about $14 billion.

Instacart will be the first major venture-backed company in the US to go public as of December 2021, and its performance is being closely watched by venture firms and late-stage startups that have been waiting for an appetite. return investor risk. The Nasdaq has bounced back this year after a dismal 2022, but companies that went public before the recession are still trading at a steep discount to their peak prices. Software developer Klaviyo is expected to hit the market soon.

Founded in 2012, Instacart delivers groceries from chains including Crogar, Costco and Wegmans, dropped its stock price significantly to make it attractive to public market investors. In early 2021, with users stuck at home and uploading delivery orders, Instacart raised money at $125 per share, from prominent venture firms like Sequoia Capital and Andreessen Horowitz, along with large fund managers Fidelity and T .Rowe Price.

Instacart has given up growth for profit, a move needed to conserve cash and attract investor interest. Revenue increased 15% in the second quarter to $716 million, down from 40% growth in the previous year and about 600% in the early months of the pandemic. The company reduced its headcount in mid-2022 and reduced costs related to customer and customer support.

Instacart began generating earnings in the second quarter of 2022, and in the most recent quarter it reported $114 million in net income, up from $8 million a year earlier.

At $10 billion, Instacart is valued at about 3.5 times annual revenue. Food delivery provider A door, which identified Instacart as a competitor in its forecast, trades at 4.25 times earnings. DoorDash’s revenue in the last quarter grew faster, at 33%, but the company is still losing money. at Uber stocks trade for less than 3 times earnings. The ride-hailing company’s Uber Eats business has been touted as an Instacart competitor.

Most of Instacart’s competition comes from Amazon as well as large brick-and-mortar retailers, such as Target and Walmart, which has its own delivery services. Shipt’s target was acquired in 2017 for $550 million.

Only about 8% of Instacart’s outstanding shares were tendered, with 36% of those sold coming from existing shareholders such as -Yes.

“We felt it was very important to provide liquidity to our employees,” CEO Fidji Simo told CNBC’s Deirdre Bosa in an interview. “This IPO is not about raising money for us. It’s really about making sure that every employee has liquidity on a stock that they work so hard for. It was not we’re looking for the perfect market window.”

The company said co-founders Brandon Leonardo and Maxwell Mullen each sell 1.5 million, and Mehta sells 700,000. Former employees, including those in executive positions as well as in production and engineering, are selling a combined 3.2 million shares.

For Instacart, that offering brought in more than $420 million in cash, adding to the nearly $2 billion in cash and equity the company had on its balance sheet at the end of June. .

WATCH: Instacart CEO says IPO is about providing liquidity to employees

Instacart CEO: This IPO is about giving workers liquidity on stock they worked hard for
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