Instacart’s $900m IPO meets goal with market rebound

NEW YORK – Grocery delivery business Instacart priced its initial public offering (IPO) at the top of a marketed range to raise US$660 million (S$900 million) in the second marquee listing in a week.

The San Francisco-based company sold 22 million shares for US$30 each on Monday.

Instacart and current shareholders had offered the shares for US$28 to US$30, a range that was elevated after chip designer Arm Holdings rose 25 per cent in its trading debut on Thursday after the year’s biggest IPO.

At the IPO price,

Instacart has a fully diluted valuation of US$9.9 billion.

That is a steep plunge from its US$39 billion valuation in a 2021 funding round when its business boomed amid Covid-19 lockdowns, but still ranks it as one of the biggest companies to go public in 2023.

Instacart’s listing combined with Arm’s is also giving equity capital markets much-needed relief after the longest drought since 2009 in the depths of the financial crisis.

As a venture-backed consumer start-up, success in its trading debut could pry open the IPO market for other companies looking to go public.

Marketing and data automation provider Klaviyo is planning to sell its shares on Tuesday, with German footwear maker Birkenstock Holding also preparing to list.

Even with Instacart’s IPO and Arm’s US$5.23 billion listing, which now includes so-called greenshoe shares, only about US$21 billion has been raised in 2023 on US exchanges, according to data compiled by Bloomberg.

That is finally catching up with the US$22 billion at this point in 2022, but still less than a tenth of the US$250 billion total for the period in a record-setting 2021, the data shows.

Founded in 2012, Instacart has faced a rapid slowdown in the growth of its core business in the wake of the pandemic and has been searching for new ways to make money.

Orders on its platform rose 18 per cent to almost 263 million in 2022, but were virtually flat in the first half of 2023 compared with a year earlier, Instacart said in its filings.

The company was able to become profitable in 2022, thanks in part to a boost in revenue from advertising, which now accounts for nearly a third of the company’s total revenue.

Instacart chief executive Fidji Simo, a Facebook product veteran, took over from co-founder Apoorva Mehta two years ago and has helped Instacart move beyond grocery delivery to focus more on behind-the-scenes technology, taking advantage of the voluminous amount of consumer data it collects to help grocery stores sell more.

The company has also explored tapping new income streams such as catering and stocking food for small- and medium-sized enterprises such as pre-schools and corporate offices, as well as a healthcare focus to deliver food and nutritional programmes through hospitals, medical providers and insurers.

While Instacart still commands the lion’s share of the market for large orders over US$75, DoorDash has been making significant market share gains on orders under US$75, Instacart’s filings show.

DoorDash, which went public in 2020, has a market value of about US$31 billion.

Instacart also competes with Uber Eats and Amazon.com’s grocery delivery service that includes Whole Foods, and Walmart’s growing e-commerce capabilities. BLOOMBERG