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Instacart’s IPO is priced at $30 per share, valuing the grocery delivery service at about $10 billion

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 capitalist-backed tech company to list on the U.S. public since December 2021 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 on Tuesday under the ticker symbol “CART.”

The 11-year-old company that delivers groceries from chains including Kroger, Costco and Wegmans had to dramatically 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. Sales increased by 15% in the year second quarter to $716 million, 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 service 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. Ubers 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 stationary retailers such as: Goal And Walmart, who 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 of the board since the company's inception appointed Former Facebook manager Fidji Simo will be his successor as CEO in 2021. Mehta steps down from the board in connection with the IPO and Simo takes over the role of chairman.

Goldman Sachs And JPMorgan Chase lead the deal.

Only about 8% of Instacart's outstanding 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, collectively sell 3.2 million.

REGARD: Klaviyo follows Instacart in down rounds of tech IPOs

Klaviyo follows Instacart in technology IPOs with declining valuations

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