The highs and lows of the Instacart $11 billion IPO

Here is a closer look at the latest company to hit the Nasdaq exchange.

IPO written in circles with a man holding a smartphone and a laptop open.

Image source: Getty Images

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The initial public offering (IPO) drought might be breaking as the Nasdaq exchange welcomes another new listing overnight. Shares in grocery pick-up and delivery service company Instacart (NASDAQ: CART) made a successful IPO after raising US$660 million.

Backed by prominent names in the venture capital community, the company priced its offering at US$30 per share. On a fully diluted basis, this valued Instacart at approximately US$11 billion ahead of its public debut.

The Instacart share price leapt 43% shortly after listing before settling 12% higher on its first trading day.

Hard to swallow for pandemic backers

A surging share price upon listing… early backers of Instacart must be rejoicing right now. That depends on when they decided to throw their money behind the grocery technology partner.

Founded by Apoorva Mehta — a former Amazon employee — in 2012, Instacart has engaged in multiple funding rounds during its private life. In 2015, a total of US$400 million was raised at a valuation of US$3.4 billion. From there, additional funding rounds in 2018 saw the company's valuation grow to US$7.87 billion.

However, Instacart's valuation took flight in 2020 as the pandemic propelled growth for its delivery service amid lockdowns. As such, the company was able to raise $265 million in additional funding at a US$39 billion valuation.

Those backers — including Andreessen Horowitz and Sequoia Capital — would still be almost 70% underwater following the Instacart IPO.

What's next for Instacart after its IPO?

Before we look at where the company plans to go, let's look at where it is coming from. Here are a few financial figures for the 12 months ended 31 December 2022:

  • Gross transaction value up 15.7% to US$28,826 million
  • Revenue up 39% to US$2,551 million
  • Gross profit up 49.3% to US$1,831 million
  • Gross margin of 67%
  • Net income of US$428 million, swinging from a US$73 million loss

According to its prospectus, the company plans to deliver growth through partnering with more retailers and increasing its advertising revenue.

Moreover, the membership program Instacart+ will be used to drive greater customer engagement.

The Instacart debut follows recent IPOs of Arm Holdings (NASDAQ: ARM) and Klaviyo.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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