Instacart Files for IPO, Shows Growing Profitability

Instacart Files for IPO, Shows Growing Profitability

The company plans for its shares to trade on the Nasdaq Global Select Market under the symbol CART.

Instacart is, indeed, a very large private company, making its IPO filing and eventual debut a critical event for the back half of 2023. Since its 2012 inception, Instacart has raised $2.9 billion in funding, according to Crunchbase. In March 2021, the company secured a $265 million funding round from investors such as Andreessen Horowitz, Sequoia Capital, D1 Capital Partners and others, at a $39 billion valuation. But as the pandemic waned and diners began to emerge from lockdowns and return to restaurants and grocery aisles, Instacart’s growth faded too, forcing the company to slash its internal valuation three times last year to about $13 billion by last October.

Orders on America’s largest online grocery delivery platform rose 18% to almost 263 million in 2022 but were virtually flat in the first half of 2023 compared with a year earlier, Instacart said in its filing with the US Securities and Exchange Commission. The company was able to become profitable in 2022, thanks in part to a boost in revenue from advertising, which now accounts for nearly a third of the company’s total revenue.

The company revealed in its filing that PepsiCo Inc. is buying $175 million of its preferred convertible stock. That endorsement by the snack-and-beverage giant was accompanied by a detailing of Instacart’s finances, showing it first took advantage of pandemic-induced growth and has since adjusted as shoppers have returned to stores.

Instacart’s revenue grew 31% to about $1.5 billion in six months ended June 30, aided by supercharged growth in its higher-margin advertising segment. It posted net income of $242 million for the first half, compared with a loss for the same period last year.

In 2022, the company posted revenue of $2.55 billion.

Despite a flattening of orders, gross transaction value increased 4% to $14.9 billion for first half of the year, according to the filing. Instacart is also managing to keep more profits from each order. Net income grew as a percent of gross transaction value from a loss of 0.3% in 2021 to a profit of 1.5% in 2022.

The company acknowledged that questions remain over its post-pandemic growth trajectory as it makes big bets beyond the core delivery service, as it also contends with competition. Instacart sees itself clearly as a grocery technology company and suggested there is plenty of room for growth. The grocery business is the largest retail category and a $1.1 trillion industry in the US, according to the filing. But only 12% of grocery sales are currently made online.

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