Instacart made its debut on the Nasdaq on Tuesday, with its shares trading at about 40% higher than its initial public offering (IPO) price. Despite opening at a lower valuation than during the height of the pandemic, the IPO market continues to show momentum.
The shares of Instacart surged as much as 43% from its $30 IPO price, reaching over $40 shortly after trading began. This increase brings Instacart's market capitalization to about $14 billion, up from its initial valuation of $9.9 billion. However, it is still far below its pre-money valuation of $39 billion reached in a private funding round in March 2021.
Instacart raised $660 million in its IPO, making it the third-largest company to go public in 2023, following Kenvue and Arm. Founded in 2012, Instacart gained popularity during the Covid-19 pandemic as stay-at-home orders drove demand for grocery delivery services. Its valuation soared from $7.5 billion in 2018 to nearly $40 billion in 2021. However, as consumer preferences changed, its valuation dwindled to $24 billion in 2022 and $12 billion in April 2023.
In the first six months of 2023, Instacart reported $1.5 billion in revenue and $242 million in net income, according to a regulatory filing. As part of the IPO, Apoorva Mehta, Instacart's largest individual shareholder and former CEO, will step down as chairman. Mehta clarified in an interview that he was not pushed out of the company and that he made the decision voluntarily.
It is worth noting that public gig economy companies have faced challenges since 2021, with share prices declining after reaching all-time highs. For instance, DoorDash is down about 70%, Uber is down about 25%, and Lyft is down more than 80%.
Investors will be watching to see how Instacart performs in the market after its first day of trading. Recent large IPOs, such as Arm, have seen their shares drop considerably since their debut. Instacart increased its IPO share price range by nearly 10% last week following the success of Arm's IPO.