IPO Report: Instacart stock opens with a bang, in another sign of life for cautious IPO market

IPO Report: Instacart stock opens with a bang, in another sign of life for cautious IPO market
By: market watch Posted On: September 19, 2023 View: 18

The grocery-delivery app Instacart, known officially as Maplebear Inc., debuted on Wall Street with a bang Tuesday, opening 40% above where its initial public offering priced before easing later on — potentially paving the way for more IPOs after a two-year dry spell.

Shares finished the day up 12% from its $30 IPO price, at $33.70. They were down 1.5% after hours.

The debut for Instacart CART, +12.33% follows the successful IPO of chip designer Arm Holdings ARM, -4.88%, and comes ahead of an expected debut from digital-marketing platform Klaviyo Inc. this week. And it comes after the IPO market stalled last year, following concerns about inflation, a wobbly economy and a middling performance from companies that went public in 2021.

“We’re coming out of the tech IPO desert,” said Alex Wellins, co-founder of the Blueshirt Group, an IPO advisory and investor relations firm. “We’re coming out of the longest drought period for technology IPOs in modern history.”

Still, he said that private companies are likely to approach markets with caution through this year, as they wait for the economy to find its footing. More of those companies, he said, are likely preparing to give themselves the option for a 2024 debut.

Interest in IPOs has eased relative to interest in the broader stock market. The Renaissance IPO ETF IPO has lost 0.8% over the past three months. Meanwhile, the the S&P 500 SPX has gained 0.5%.

Instacart’s debut also marked the exit of co-founder Apoorva Mehta, who the company has said would depart as chairman as in connection with the offering. Mehta, in an interview with Barron’s on Tuesday, said he planned to step back from Instacart to focus on ambitions in the healthcare industry.

Late Monday, Instacart priced its 22 million shares at $30 apiece, which was at the top of the expected range, giving the company a fully-diluted valuation of roughly $10 billion.

The stock’s first trade on the Nasdaq was at $42.00 at 12:49 p.m. Eastern for 2.59 million shares. At that price, the company would be valued at $14.2 billion, based on 338.8 million as-converted, fully diluted shares outstanding after the IPO.

Read: Instacart IPO: 5 things to know about the app that’s looking to ride a ‘massive digital transformation’ in grocery shopping.

Instacart is hoping to take advantage of a grocery-shopping experience that it says has yet to be fully digitized. But it faces large rivals like Walmart Inc. WMT, -0.02% and Amazon.com Inc. AMZN, -1.68%, and slower growth, as grocery shoppers feel the pinch from higher prices. Instacart’s top 3 customers account for big chunk of shopper demand.

Instacart’s IPO, will also give investors a deeper look at demand for a newer line of business for physical and online retailers: advertising. The company, like Amazon and Walmart, is trying to make more money off of digital ads that appear on its app and website. Sales have grown in that segment. But Instacart, in its IPO filing, said some of the businesses paying for those ads were still skittish on the economy.

But as more shopping happens online and privacy concerns grow, the battle for consumer data — and platforms that can harness it into more effective ads — has grown more intense.

“As Apple and Google make changes to their data privacy policies, first-party data is becoming increasingly valuable for data collaboration between retailers and brands,” said Kevin Dunn, vice president of industry sales, retail and CPG at LiveRamp, a data collaboration platform. 

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