- Instacart (NDAQ:CART) opened its second day of trading in the red with a market cap of approximately US$8.75 billion
- This follows day-one gains of 12.3 per cent to a market cap of more than US$11 billion for the grocery delivery company, whose profitable IPO, along with that of semiconductor designer Arm Holdings, are signaling a potential resurgence in new share offerings
- Instacart is a grocery technology company with a 70 per cent share of the third-party U.S. grocery delivery market
- Instacart stock (NDAQ:CART) is down by 6.05 per cent trading at US$31.66 per share
Instacart (NDAQ:CART) opened its second day of trading in the red with a market cap of approximately US$8.75 billion.
This follows day-one gains of 12.3 per cent to a market cap of more than US$11 billion for the grocery delivery company, whose profitable IPO, listed at US$30 per share, along with that of semiconductor designer Arm Holdings on Sept. 14, the largest in nearly two years at US$5.23 billion raised, are heralding a potential resurgence in new share offerings. Only 71 IPOs took place in the United States last year, the lowest since 2009.
Instacart, founded in 2012 in San Francisco, raised US$660 million in its first day of trading, making it the fourth-biggest U.S. IPO of the year, but at a valuation about four times lower than its US$39 billion valuation during a 2021 fund-raising round.
Key investors in Instacart’s initial listing include PepsiCo, Norway’s Norges Bank, TCV, Sequoia, D1 Capital Partners LP and Valiant Capital Management, representing up to 60 per cent of shares on offer.
Instacart boasts delivery and pickup from 85 per cent of U.S. grocers across more than 80,000 stores thanks to a base of more than 600,000 freelance shoppers. It also collects revenue from in-store smart carts and electronic shelf tags, as well as ads for food companies and retailers. These offerings have granted the company approximately 7.7 million active users that spend an average of US$317 per month.
In a letter to investors, CEO Fidji Simo, a former Facebook executive, stated that she expects online grocery sales to represent about 25 per cent of the US$1.1. trillion U.S. grocery market, entailing more than 100 per cent growth from the current 12 per cent figure. The grocery delivery market is about four times larger than it was in 2019, according to Brick Meets Click, despite easing demand in line with lower COVID-19 infections.
Growth in online grocery sales will entail steep competition, with Instacart’s 70 per cent share of the third-party U.S. grocery delivery market facing threats from DoorDash’s 10 per cent share, with more grocers being added to its platform, and an increasing number of grocers like Target and Walmart undertaking delivery themselves to avoid Instacart’s 15-20 per cent markup compared with shopping in store.
That said, Instacart managed to grow revenue by 31 per cent to US$1.47 billion in the first six months of 2023, including net income of US$242 million – primarily because of higher-margin advertising fees, which represent about 30 per cent of revenue – amid flat delivery orders following 18 per cent growth between 2021 and 2022, and a growing preference for cheaper curbside pickup among consumers looking to counteract inflation.
It remains to be seen whether a new IPO frenzy is upon us, but if today’s US$576 million offering from Klaviyo, a market and data analytics specialist, as well as upcoming IPOs from German footwear maker Birkenstock and Vietnam-based internet platform VNG, are any indication, shareholders’ appetite for new allocation opportunities has far from peaked.
Instacart is a grocery technology company enabling end users to transact with retailers for grocery and non-grocery items and with shoppers to pick and deliver the items on the end user’s behalf.
Instacart stock (NDAQ:CART) is down by 6.05 per cent trading at US$31.66 per share as of 10:11 am ET.
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