The bellwether of the 2023 tech IPO window reopening has made its debut: Grocery delivery company Instacart has priced at $30 a share, at the top end of its expected range.
The IPO values Instacart at $10 billion on a fully diluted basis, marking a huge windfall for its largest shareholders: VC firm Sequoia and former Instacart CEO Apoorva Mehta.
But it’s still a more than 70% discount from its last private valuation, a $265 million round raised at a $39 billion post-money valuation in 2021, according to PitchBook data.
Sequoia, which repeatedly backed Instacart over the course of a decade, has a stake worth $1.54 billion at the IPO price. Mehta’s ownership is worth $869 million.
But predictably, the valuation is still significantly down from the ecommerce company’s lofty valuations in its late-stage rounds: Investors who only jumped in following its 2018 Series F—which priced just shy of $30 per share—are likely to be underwater in at least some of their investments. That includes DST Global and General Catalyst, which both joined the cap table at its Series G in 2020 at a $13.8 billion post-money valuation, according to PitchBook data.
Still, the valuation at the high end of the price range, which the company increased late last week, is indicative of strengthening demand for tech IPOs.
A price of $30 per share shakes out to a valuation that’s roughly 3.9 times last year’s sales, which means it’s pricing slightly higher than its peers that are already publicly listed and trading at about three times their 2023 sales, according to Ali Mogharabi, a senior equity analyst at Morningstar.
Instacart’s rocky road to IPO
The grocery delivery company’s IPO has been in the works for years. Back in 2021, the company reportedly drafted an S-1 filing and weighed a potential sale to rival DoorDash, The Information reported.
Instacart has definitely had some bumps in the road, including recording a $70 million net loss in 2020 and a $73 million loss in 2021. But in 2022, it returned to positive profits of $428 million.
Instacart managed to turn a profit even against the headwinds buffeting many of its competitors that flourished in the pandemic-era boom. Critical to its profit margins has been the development of its advertising business, which brought in around $470 million in 2022—29% of the company’s total revenue.
On top of selling advertising space on customers’ feeds to large food retailers, Instacart has quietly sold stakes to several large grocery chains, including Albertsons and Kroger, estimated to generate eight-figure returns, The Information reported.
But as much as those partnerships have provided reassurance to Instacart investors, they also pose unresolved questions.
“While those agreements do provide incentives for the grocery companies to work with the firm, the question remains: Will they sell their stake? And if they do, When?” Mogharabi said.
A promising debut for Instacart may well spell the wholesale reopening of tech’s IPO window, on top of SoftBank-backed Arm, which went public last week with a successful first-day pop. SaaS platform Klaviyo is also to go public in the coming weeks in a closely followed listing.
"[But] before we see a broad-spectrum re-opening of the IPO market, we still need clarity around interest rates, inflation, and recession potential,” said Eric Bellomo, PitchBook’s ecommerce analyst.
Related read: Analyzing the IPO Market Outlook
Featured image by Hispanolistic/Getty Images
