Online grocery delivery platform Instacart is set to go public in an initial public offering (IPO) that could value the company at up to $9.3 billion. While this valuation is significantly lower than the $39 billion valuation the company enjoyed in 2021, it marks a crucial moment for tech IPOs and could signal a trend of lower equity valuations for startups compared to those witnessed during the pandemic.
Instacart has announced that it will offer 22 million shares, equivalent to 8% of its stock, at a price range of $26 to $28 per share. This offering is expected to raise up to $616 million and could value the company between $7.17 billion and $7.73 billion. On a fully diluted basis, including all stock options and rights, the IPO could value Instacart at up to $9.3 billion.
This IPO comes at a pivotal time for venture capital-backed tech startups entering the public markets. It’s one of the first major tests of investor sentiment for such companies in around two years. Instacart’s performance will be closely observed by other private tech firms and their investors. This IPO could determine whether we see a wave of IPOs at lower valuations than those witnessed during the pandemic.
Instacart’s decision to reduce its valuation to $12 billion earlier this year as part of an internal accounting exercise has implications for investors who had initially bought shares at a higher valuation. Despite the drop in valuation, key venture capital firms such as Sequoia Capital and Khosla Ventures are expected to benefit from the IPO.
Sequoia Capital, which owns about 15% of Instacart, is among the startup’s largest VC backers. The firm has invested approximately $300 million in Instacart across various funding rounds, including one in 2021. If Instacart goes public at a $10 billion valuation, Sequoia’s stake would be valued at around $1.5 billion.
In an unusual move, several private backers of Instacart, including Sequoia, will purchase additional shares at the IPO. This group, which also includes Norges Bank, TCV, Valiant Capital, and D1 Capital, will acquire approximately $400 million worth of Instacart stock as cornerstone investors, demonstrating optimism about the company’s performance in the public markets.
Instacart’s IPO is seen as a significant indicator of investor appetite for tech listings, particularly for late-stage tech startups reporting losses. The outcome could influence the valuations and timing of future IPOs.
In recent times, many startups have faced the challenge of cost-cutting and lowering growth projections amid a downturn in the tech market. Instacart’s ability to list successfully at a reduced valuation compared to its peak private value could set an important precedent for other startups eyeing the public markets.
Instacart’s IPO, led by Goldman Sachs and JPMorgan, will be closely watched, and its performance could shape the trajectory of tech IPOs in the coming months. The company plans to list on Nasdaq under the ticker symbol CART.
As the tech IPO landscape continues to evolve, Instacart’s journey to the public markets serves as a testament to the changing dynamics of startup valuations and investor sentiment in the tech sector.