Instacart, the popular grocery delivery service, made a triumphant debut on the Nasdaq stock exchange this week. Opening at $30 per share, the company’s shares quickly soared to a peak of $42.95 before closing at $33.70, marking an impressive 12.3 percent increase on the first day of trading. This strong performance resulted in a market value of over $11 billion for the San Francisco-based company, which has been eagerly awaiting this milestone since its inception in 2012.
The successful IPO of Instacart is being seen as a bellwether for other tech companies considering similar moves, suggesting a potential resurgence in the IPO market. Despite a turbulent market last year, marked by recession fears and the lowest number of IPOs in the United States since 2009, a renewed sense of optimism is now evident. The company’s performance, as well as the recent successful listing of UK chip maker Arm Holdings, indicates a shift in the market, with the potential for increased IPO activity in the coming months.
Instacart’s Successful Stock Market Debut
Instacart, the prominent grocery delivery company, had a successful stock market debut on Tuesday, with shares initially priced at $30 per share, reaching a peak of $42.95 during initial trading on the Nasdaq stock exchange. By the close of the day, the stock had risen 12.3 percent to $33.70, valuing the company at more than $11 billion.
A Celebratory IPO
The initial public offering (IPO) was marked with a celebratory bell ringing at Instacart’s San Francisco headquarters by CEO Fidji Simo and other executives. The bell, shaped like the company’s carrot logo, was rung in the presence of around 1,000 employees. Instacart, founded in 2012, had initially filed privately for an IPO in May 2022, but delayed plans due to market turbulence and recession fears.
Significance of Instacart’s IPO
Despite a sluggish market in 2021, with only 71 IPOs in the United States – the lowest since 2009 – there has been a resurgence of IPO activity this year. "The global financial markets are buzzing with optimism for a potential resurgence in the IPO market,” said Joe Endoso, president at Linqto. The success of Instacart’s IPO could potentially motivate other tech companies to consider IPOs in the coming months.
A Glimpse into Instacart’s Business
Instacart raised $660 million in its IPO, selling 22 million shares at $30 each, giving the company a market value around $10 billion, a significant drop from its $39 billion valuation after a fundraising round in 2021. The company provides delivery and pickup from 85% of US grocers, or over 80,000 stores, using a network of 600,000 freelance shoppers. It also offers in-store technology and sells online ads to food companies and retailers. With 7.7 million active customers spending about $317 per month, Instacart holds a significant share in the $1.1 trillion US grocery market.
Challenges and Opportunities
Even as Instacart enjoys its successful IPO, it grapples with a competitive market comprising of Uber Eats and DoorDash, among others. It also faces resistance from grocers for its high prices and strict pricing rules. However, despite slowing order growth and the impact of food price inflation, Instacart’s revenue was up 31% to $1.47 million in the first six months of this year, mainly due to increases in advertising fees.
Instacart’s successful IPO underscores the potential of the tech and delivery market, while also highlighting the challenges faced by third-party delivery services. The company’s strength lies in its large network and advanced in-store technology, but it will need to navigate a complex landscape as competition heats up and grocers explore their own delivery capabilities.