Fidji Simo, CEO of Instacart Inc., speaks during a Bloomberg Studio 1.0 interview in San Francisco, California, U.S., on Thursday, March 3, 2022.
David Paul Morris | Bloomberg | Getty Images
Instacart, the grocery delivery company that has seen massive growth during the pandemic, priced its long-awaited initial public offering at $30 per share on Monday, becoming the first notable venture-backed tech company to enter the U.S. public market since December 2021.
The offering came in at the high end of the expected range of $28 to $30 per share, and values Instacart at approximately $10 billion on a fully diluted basis. The IPO sold 22 million shares, of which 14.1 million came from the company and 7.9 million from existing shareholders. The stock will debut on the Nasdaq Stock Market on Tuesday under the ticker symbol “CART.”
The 11-year-old company, which delivers groceries from chains, among others Crochet, Costco and Wegmans, had to drastically reduce the share price to make it attractive to public market investors. In early 2021, at the height of the Covid pandemic, Instacart raised money at a valuation of $39 billion, or $125 per share, from top venture capital firms like Sequoia Capital and Andreessen Horowitz, along with major asset managers Fidelity and T. Rowe Price.
The tech IPO market has been largely closed since December 2021 as inflationary pressures and rising interest rates pushed investors out of risk and led to a decline in internet and software stock prices. Instacart’s performance, along with the upcoming debut of cloud software provider Klaviyo, could help determine whether other billion-dollar companies in the pipeline are willing to test the waters.
Instacart has sacrificed growth for profitability, proving that its business model can generate revenue. Revenue rose 15% to $716 million in the second quarter, compared with 40% growth in the year-ago period and about 600% in the early months of the pandemic. The company reduced headcount and reduced costs associated with customer and shop support in mid-2022.
Instacart started generating revenue in the second quarter of 2022, reporting $114 million in net revenue in the latest quarter, up from $8 million a year earlier.
At $10 billion, Instacart will be worth about 3.5 times annual sales. Food delivery provider DoorDash, which lists Instacart as a competitor in its prospectus, trades at 4.25 times revenue. DoorDash’s revenue grew faster in the last quarter, by 33%, but the company is still losing money. Ubers shares trade for less than three times sales. The ride-sharing company’s Uber Eats business is also listed as an Instacart competitor.
Most of Instacart’s competition comes from Amazon as well as major brick-and-mortar retailers, such as Goal And Walmart, which have their own delivery service. Target acquired Shipt in 2017 for $550 million.
Sequoia is Instacart’s largest investor, with a fully diluted 15% stake. While the Silicon Valley company is sitting on a paper profit of more than $1 billion on its total investment, the $50 million worth of shares it bought in 2021 are now worth about a quarter of that amount.
Instacart co-founder Apoorva Mehta owns shares worth more than $800 million, and is selling a small portion of it in the IPO. Mehta has been executive chairman since the company appointed ex-Facebook CEO Fidji Simo as his successor as CEO in 2021. Mehta will resign from the board of directors in connection with the IPO and Simo will take on the role of chairman.
Goldman Sachs And JPMorgan Chase lead the deal.
Only about 8% of Instacart’s outstanding shares were tendered in the offering, with 36% of the shares sold coming from existing shareholders. The company said co-founders Brandon Leonardo and Maxwell Mullen are selling 1.5 million each, while Mehta is selling 700,000. Former employees, including those in leadership, product and engineering positions, are selling a total of 3.2 million shares.
WATCH: Klaviyo follows Instacart in tech IPO rounds