Instacart's IPO at High End of Expectations

Instacart has set a price of $30 a share for its initial public offering (IPO), at the high end of expectations. The grocery technology company released the details of its IPO on Sept. 18.  

Its IPO of 22 million shares of its common stock, 14.1 million of which are being sold by Instacart and 7.9 million of which are being sold by certain selling stockholders, will be offered at a public offering price of $30 per share. The company indicated that it will not receive any proceeds from any sale of shares by the selling stockholders. Instacart has also granted the underwriters a 30-day option to purchase up to an additional 3.3 million shares of its common stock at the IPO price, less underwriting discounts and commissions. The shares will start trading today on the Nasdaq Global Select Market, under the symbol CART. The offering is expected to close on Sept. 21, subject to customary closing conditions.

[Read more: "Game-Changing Tech Updates at Instacart"]

Bloomberg reported that in conjunction with the IPO, PepsiCo Inc. is buying $175 million of the company’s preferred convertible stock. 

Instacart, backed by more than $2 billion in venture funds, is the largest grocery delivery company by sales. As reported by AP News, Instacart controlled 70% of the third-party U.S. grocery delivery market as of August, according to YipitData, a market research firm. DoorDash controls around 10%. This week, DoorDash added more U.S. grocers to its offerings, including Cub, Lowe’s Markets and Eataly.

Under Chief Executive Fidji Simo, Instacart has expanded its core grocery delivery business while expanding into other areas. Founded in San Francisco in 2012, the company partners with more than 1,400 national, regional and local retail banners to facilitate online shopping, delivery and pickup services from more than 80,000 stores across North America on the Instacart Marketplace. The Instacart platform offers retailers a suite of enterprise-grade technology products and services to power their e-commerce experiences, fulfill orders, digitize brick-and-mortar stores, provide advertising services, and glean insights. With Instacart Ads, thousands of CPG brands – from category leaders to emerging brands – partner with the company to connect directly with consumers online, right at the point of purchase.

In its prospectus filed with the Securities and Exchange Commission in August, Instacart said that its revenue increased about 31% to $1.5 billion for the first six months of the year. Transaction revenue grew from $1,262 million (or 69% of total revenue) in 2021 to $1,811 million (or 71% of total revenue) in 2022, an increase of 44%, and from $799 million (or 71% of total revenue) for the six months ended June 30, 2022, to $1,069 million (or 72% of total revenue) for the six months ended June 30, 2023, an increase of 34%.

According to CNBC, almost three-fourths of the company’s revenue comes from transaction fees of about $16 an order, split between the store and the customer, and about 28% comes from advertising. 

The company says that improvements in unit economics and operating leverage have helped it drive $242 million of net income and $279 million of adjusted EBITDA in the first six months of 2023, compared to $74 million of net loss and $20 million of adjusted EBITDA in the prior-year period. 

“As grocery spend becomes increasingly omnichannel, we believe that more of the approximately $200 billion that CPG brands spend to advertise their products will follow, representing another compelling growth vector, as nearly 25% of that spend is through online channels as of 2022. We believe our market leadership and over a decade of investment in technology custom-built for online grocery put us in a position to capture this long-term opportunity while still navigating near-term macroeconomic headwinds and ensuring the best experience for our retailers, customers, brands and shoppers,” the company said in its Form S-1.

Goldman Sachs & Co. LLC and J.P. Morgan are acting as lead book-running managers for Instacart’s IPO. BofA Securities, Barclays and Citigroup are acting as additional book-running managers, and Baird, JMP Securities (A Citizens Co.), LionTree, Oppenheimer & Co., Piper Sandler, SoFi, Stifel, Wedbush Securities, Blaylock Van LLC, Drexel Hamilton, Loop Capital Markets, R. Seelaus & Co. LLC, Ramirez & Co. Inc., Stern, and Tigress Financial Partners are acting as co-managers for the offering.

This year, Progressive Grocer was named a finalist in the Eddie & Ozzie awards for its exclusive profile of Instacart’s CEO, “Instacart is Ready for the 'Groceryssance’.”