San Francisco-based grocery delivery company Instacart has successfully raised $660 million in its initial public offering (IPO) of stock. Selling 22 million shares at $30 per share, the pricing of the IPO gave Instacart a market value of around $10 billion. Its shares were set to begin trading on the Nasdaq stock exchange under the symbol “CART”.
Instacart provides delivery and pickup services from 85% of US grocers, partnering with over 80,000 stores, and employs a network of 600,000 freelance shoppers. The company also offers in-store technology such as smart carts and electronic shelf tags, and sells online ads to food companies and retailers. It currently has 7.7 million active customers who spend an average of $317 per month on its platform.
The US grocery market is a $1.1 trillion industry, but only 12% of sales are made online. Instacart CEO Fidji Simo believes there is tremendous potential for growth in the grocery delivery sector, stating that she expects online grocery sales to at least double over time. However, Instacart faces increasing competition from companies like Uber Eats and DoorDash, which entered the grocery delivery market in 2020.
Despite the challenges, Instacart currently controls 70% of the third-party US grocery delivery market. However, it faces pressure from grocers themselves who may find its prices and pricing rules for grocers using its software to run their own websites unfavorable. Some grocers have even ended partnerships with Instacart to build their own delivery capabilities. Instacart’s success relies on repeat customers to sell ads, and it must find ways to retain them as competitors expand into grocery delivery and grocers seek to improve the profitability of selling online.
While food price inflation and the popularity of curbside pickup have dampened demand for delivery, Instacart’s revenue still increased by 31% to $1.47 million in the first six months of this year. The company reported net income of $242 million during the same period. Among those confident in Instacart’s prospects is PepsiCo, which agreed to purchase $175 million in convertible preferred stock in a private placement.
The IPO marks a significant milestone for Instacart, which was founded in 2012. The company had initially filed for an IPO in May 2022 but postponed its plans due to market volatility caused by recession fears. However, with the market now seeing increased IPO activity, Instacart decided the time was right to go public.