Instacart Inc. CEO Fidji Simo 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 business boom during the pandemic, priced its long-awaited initial public offering at $30 a share on Monday, becoming the first notable venture capital-backed tech company to go public since December 2021 reached the US market.

The offer was at the high end of the expected range of $28 to $30 per share and values ​​Instacart at about $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 is scheduled to debut on the Nasdaq Stock Exchange on Tuesday under the ticker symbol “CART.”

The 11-year-old company, which delivers groceries to chains like Kroger, Costco and Wegmans, had to sharply lower its stock price to make it attractive to public market investors. In early 2021, at the height of the Covid pandemic, Instacart raised $39 billion in money, or $125 per share, from well-known venture capital firms such as Sequoia Capital and Andreessen Horowitz, as well as major asset managers Fidelity and T. Rowe Price.

The technology IPO market has been largely closed since December 2021 as inflationary pressures and rising interest rates pushed investors out of risk and caused prices of internet and software stocks to fall. Instacart’s performance, along with the upcoming debut of cloud software provider Klaviyo, could help determine whether other companies with more than $1 billion in revenue in the pipeline are ready to test the waters.

Instacart has sacrificed growth for profitability, proving its business model can generate revenue. Revenue rose 15% to $716 million in the second quarter, down from 40% growth in the year-earlier period and about 600% in the early months of the pandemic. The company reduced headcount and reduced costs related to customer and buyer support in mid-2022.

Instacart began turning a profit in the second quarter of 2022, reporting net income of $114 million in the most recent quarter, up from $8 million a year earlier.

At $10 billion, Instacart will be worth about 3.5 times annual sales. Grocery delivery company DoorDash, which Instacart lists as a competitor in its prospectus, trades at 4.25 times sales. DoorDash’s revenue grew faster last quarter, up 33%, but the company is still losing money. Uber shares trade for less than three times sales. The ride-sharing company’s Uber Eats business is also mentioned as an Instacart competitor.

Most of Instacart’s competition comes from Amazon as well as large brick-and-mortar retailers like Target and Walmart that have their own delivery services. Target acquired Shipt in 2017 for $550 million.

Sequoia is Instacart’s largest investor, with a fully diluted 15% stake. While on paper the Silicon Valley company is making over $1 billion in profit on its total investment, the $50 million in shares it bought in 2021 are now worth about a quarter of that amount.

Instacart co-founder Apoorva Mehta owns more than $800 million in stock and is selling a small portion of it in the IPO. Mehta has been chairman since the company named former Facebook executive Fidji Simo as his successor as CEO in 2021. Mehta is stepping down from the board in connection with the IPO and Simo is taking over the role of CEO.

Goldman Sachs and JPMorgan Chase are leading the deal.

Only about 8% of outstanding Instacart shares were floated as part of the offering, with 36% of 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 who worked in management positions and in product and engineering, sold a total of 3.2 million shares.

REGARD: Klaviyo follows Instacart in down rounds of technology IPOs

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