Grocery delivery company Instacart priced its initial public offering at the top of the market range, raising $660 million in its second major listing in a week.
The San Francisco-based company sold 22 million shares on Monday at $30 each, according to a statement. Instacart and existing shareholders are offering shares at prices ranging from $28 to $30, as chip designer Arm Holdings Plc jumped 25% in its initial public offering on Thursday, making it the biggest IPO this year.
At the IPO price, Instacart’s fully diluted valuation is $9.9 billion. That’s down sharply from a $39 billion valuation in a 2021 funding round when the company’s business boomed during coronavirus lockdowns, but still ranks it as one of the largest companies to go public this year.
Instacart’s joint listing with Arm also provides much-needed relief to equity capital markets after their longest drought since the depths of the financial crisis in 2009. As a venture-backed consumer startup, the success of its first deal could open up the IPO market for other companies looking to go public.
Klaviyo, Birkenstock shoes
Marketing and data automation provider Klaviyo Inc. plans to sell its shares on Tuesday, and German shoemaker Birkenstock Holding Ltd. is also preparing to go public.
Even with Instacart’s IPO and Arm’s $5.23 billion listing that now includes so-called greenshoe shares, only about $21 billion has been raised on U.S. exchanges this year, according to data compiled by Bloomberg. The figure has finally caught up with last year’s $22 billion, but is still less than one-tenth of the record $250 billion total for the same period in 2021, data shows.
pricing decisions
Instacart decided to price its stock at $30 or higher early Monday, according to Bloomberg. Like Arm, Instacart considered pricing its shares above the market range but ultimately chose not to exceed the terms offered.
Instacart also took another cue from Arm, gathering big investors to back its listing. PepsiCo is buying $175 million of preferred convertible stock in Instacart. The company has also invited Norges Bank, TCV, Sequoia Capital, D1 Capital Partners LP and Valiant Capital Management as cornerstone investors, which could hold up to 60% of the shares, according to its prospectus.
Instacart’s largest investors include Sequoia Capital and D1 Capital Partners, according to the filing. Other investors include Tiger Global Management and Coatue Management, according to PitchBook.
The IPO was led by Goldman Sachs Group Inc. and JPMorgan Chase & Co., with Bank of America, Barclays and Citigroup also participating, along with 15 other underwriters.
Instacart, incorporated as Maplebear Inc., sold 14.1 million shares in the IPO and existing shareholders sold 7.9 million shares, the statement said. The company’s shares are scheduled to begin trading on the Nasdaq Global Select Market on Tuesday under the symbol CART.
Instacart was founded in 2012. Affected by the epidemic, the growth of its core business has slowed down rapidly, and it has been looking for new ways to make money.
Promoting ads
Instacart said in its filing that order volume on its platform grew 18% in 2022 to nearly 263 million orders, but was nearly flat in the first half of 2023 compared with the same period last year. The company will be able to become profitable in 2022 thanks in part to growth in advertising revenue, which now accounts for nearly a third of the company’s total revenue.
Although orders were flattening, total transactions in the first half grew 4% to $14.9 billion. Instacart also manages to make more profit from each order. Net profit increased as a percentage of total transaction value, with profits set to rise 1.5% in 2022, replacing a 0.3% loss in 2021.
Instacart CEO Fidji Simo, a Facebook product veteran who succeeded co-founder Apoorva Mehta two years ago, has helped Instacart move beyond grocery delivery and focus more on behind-the-scenes technology to take advantage of large numbers of consumers. The data it collects can help grocery stores sell more Multiple products. Simo has reconfigured Instacart’s business model and fleshed out the company’s portfolio of products it can sell to grocers, from analytics software to fulfillment services, a 15-minute delivery promise and an advertising platform.
Simo believes that by equipping brick-and-mortar supermarkets like Kroger Co. and Wegmans with e-commerce technology, coupled with Instacart’s existing online presence, the company can make a difference whether people are perusing the app at home or hand-picking tomatoes at the store. will develop and grow. .
The company is also exploring developing new revenue streams, such as catering and stocking food for small and medium-sized businesses such as kindergartens and corporate offices, as well as a healthcare focus that provides food and nutrition programs through hospitals, healthcare providers and insurance companies.
While Instacart still holds the lion’s share of the market for large orders over $75, DoorDash Inc.’s market share for orders under $75 has been growing significantly, Instacart filings show. DoorDash went public in 2020 and has a market capitalization of approximately $31 billion. Instacart also competes with Uber Eats and Amazon.com Inc.’s grocery delivery services, including Whole Foods, as well as Walmart Inc.’s growing e-commerce capabilities.
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