Grocery delivery company Instacart is all set for its public debut. Initially aiming at an $8.6 – $9.3 billion valuation, reports indicate it could be down to a $7.7 – $7.8 valuation. The numbers are a fall from the $39 billion valuation Instacart had garnered in 2021, during fundraising, with $265 million raised from investors. In 2022, the company reduced its valuation to about $24 billion, an almost 40% drop, in an attempt to help adapt to market conditions and regain market favor. While there is still room for the IPO valuation range to change during the roadshow, the margins may not be significantly altered. Instacart’s IPO valuation will continue to draw eyes as companies watch for the market’s reaction to new listings.
Instacart IPO Valuation
According to The Wall Street Journal, the core of Instacart’s business, its grocery delivery service, has slowed down considerably with gross transaction volumes increasing by only 4% to $14.9 billion. Transaction revenue has risen by 34% to $1 billion. The company’s attention, now centered on advertising and other technological services, witnessed a 24% growth to $406 million.
Instacart has already secured a deal with PepsiCo prior to the IPO, with a promised $175 Series A preferred stock sale. Many have wondered at PepsiCo’s decision as Instacart works more as a platform for retailers than brands, but the company’s support could be a big boost for the grocery delivery platform. Cornerstone investors such as Norges Bank and other entities have also expressed interest in up to $400 million from the company, as per Bloomberg.
The grocery delivery company has offered up 22 million shares in total, with 14.1 million being shares that are to be newly issued by the company and another 7.9 million shares from selling stockholders. Instacart’s IPO is likely to be set at an offer price between $26 – $28, with a hope to raise approximately $616 million.
Instacart: Bridging the Gap between E-commerce and Grocery Delivery
Founded in 2012 by entrepreneur Apoorva Mehta, the humble San Francisco-based startup has grown by leaps since its inception. With Fidji Simo currently at the reins as CEO, the company has made several acquisitions during its time, starting with Unata and going on to more recent ones like Rosie and Eversight, which have additionally marked the company’s journey toward AI. Instacart has also partnered with more than 1400 companies such as Aldi, Kroger, Lowes, etc. in order to take on Amazon, especially after the company’s acquisition of retail giant Whole Foods.
Instacart confidentially submitted its IPO filings to the U.S. Securities and Exchange Commission (SEC) in May 2022 but halted proceedings due to market complications. Its IPO filing in August 2023 indicates that the company is now ready to go through with the proceedings this time, soon to be listed under the “CART” ticker on the Nasdaq exchange.
“Our GTV, representing the online sales we power for all of our retail partners, grew at a compound annual growth rate of 80% between 2018 and 2022, compared to 50% for the overall online grocery market and 1% for offline grocery. We have demonstrated our ability to help our retail partners drive strong growth and stay competitive in a complex and increasingly digital industry.”
– CEO Fidji Simo
Introducing Instacart in the prospectus, Simo explains that only 12% of grocery sales currently take place online.
In 2022, McKinsey reported that while the e-commerce boom during the pandemic was due to safety and convenience—factors that were no longer as pressing post-pandemic—consumers also enjoyed unique features that online platforms offered, such as product comparisons and personalized promotions. The research also indicated that 55% of surveyed retailers felt they were not equipped to attract the talent necessary to make the shift to digital commerce, with many worried about losing their market share during the online transition. This is where companies like Instacart are able to shine, and such factors are likely to help in Instacart’s valuation.
IPO Filings 2023
Stock Analysis reports that only 106 IPOs have entered the US stock market in 2023, a 31.17% drop from the 154 IPOs by this time in 2022. The IPO market has been largely latent since 2021. Following Instacart’s IPO filing, there is talk of whether the company will be able to perform better than its competitors like Lyft and Uber, which are still taking hits in regard to profitability. Hopes are higher for the gig economy company as it enters the market backed by multiple quarters of profitability.
Another company to look out for is British chip designer ARM Holdings, which is owned by Japan’s Softbank Group. It is believed that the company could see a valuation of up to $52 billion and has already found major cornerstone investors like Apple, Intel, Nvidia, Advanced Micro Devices, and Samsung Electronics. Word of Klaviyo and its $6.8 billion valuation is also of note as the marketing automation platform gets set to launch its roadshow.
