Instacart, the San-Francisco based grocery delivery firm, experienced a rollercoaster ride on its first day of public trading. After being priced at $30 during its Initial Public Offering (IPO), shares in the company soared 40% higher to peak at $42.95, finally settling at $33.70 by close of trading. This tumultuous debut, which saw the company’s value fluctuate wildly, culminated in a first-day pop of 12.3%, leaving Instacart with a market value of $11.2 billion.

The IPO is one of the most anticipated of the year, following in the footsteps of chip designer Arm Holdings. Instacart’s public debut, along with Arm Holdings, is expected to rejuvenate the somewhat stagnant IPO market. The company, also known as Maplebear, managed to raise a substantial $660 million from its IPO, selling 22 million shares. Of this, approximately $420 million goes directly to the company, providing a significant cash injection for the business. Instacart’s future trading performance will largely hinge on investor confidence in the gig economy’s growth and profitability prospects.

Instacart’s Debut in the Public Market: A Rollercoaster Ride

Instacart, the San Francisco-based delivery firm, had a turbulent first day in the public market. Despite initial pricing at $30 per share, the stock opened 40% higher, peaking at $42.95 before closing at $33.70. This final figure marked a respectable 12.3% first-day increase. In light of these events, the company’s current market value stands at $11.2 billion.

The IPO Breakdown

In its Initial Public Offering (IPO) on Monday, Instacart sold 22 million shares, raising approximately $660 million. This amount includes nearly $420 million going directly to the company. This event, along with last week’s listing of chip designer Arm Holdings, is anticipated to invigorate the IPO market, which has been relatively dormant for the majority of the year. Klaviyo, a marketing software company, is slated to start trading this Wednesday.

The Gig Economy and Beyond

The future performance of Instacart’s shares will largely depend on investors’ confidence in the continuing expansion and profitability of the gig economy. Formally known as Maplebear, Instacart raked in $2.55 billion in revenue last year, marking a 39% increase from the previous year. Approximately 75% of this revenue was derived from its primary business – delivering groceries utilizing contractors. The remaining revenue was generated through other services and a novel feature, Instacart Ads, which allows retailers to advertise to customers.

Financial Performance and Competition

Instacart reported net losses of $70 million and $73 million in 2020 and 2021 respectively, but managed to generate net income of $428 million in 2022, largely due to a $358 million tax benefit. At the opening price of $42, the company was valued at approximately six times its annual sales. Its main competition, DoorDash, has a lower price-to-sales ratio of 4.1 times. Despite increasing annual sales since its IPO in 2020, DoorDash is yet to turn a per-share profit. Other competitors include UberEats, a subsidiary of Uber Technologies, and Shipt, owned by Target.

A Look Back and Forward

Instacart, founded in 2012, officially filed to go public on August 25, following a confidential registration for a potential IPO in May 2022. As a private entity, the company was valued as high as $39 billion.

Takeaways

Despite the initial volatility, Instacart’s successful IPO signifies investor confidence in the expansion of the gig economy. However, with mounting competition and fluctuating profitability, the company faces significant challenges in maintaining its growth trajectory. As the IPO market heats up, all eyes will be on Instacart’s performance in the coming months.