Instacart IPO: Stock Struggles to Gain best Momentum 2023
Following its initial public offering (IPO), Instacart experienced a decline in its share price over two days despite a promising 12.7% increase on its NASDAQ debut. The stock initially settled just above its IPO price of $30 per share on its first full day of trading, fluctuating between approximately $30 and $30.80 on the subsequent day. As a result, the current valuation of the grocery delivery company stands at approximately $10 billion.
Analysts have pointed to concerns about Instacart’s growth prospects, primarily due to intense competition from other delivery services and self-delivery options offered by retailers like FreshDirect and Amazon Fresh. Furthermore, broader market sentiments have been cautious, influenced by ongoing economic uncertainties and consumer spending trends.
This business model relies on gig workers who shop for and deliver goods from various retail partners. Additionally, the company offers e-commerce technology services to these retail partners and operates an advertising network, which contributed to revenue and profit increases in the past year.
Bernie McTernan, an analyst at Needham, expressed reservations about the structural challenges facing online grocery shopping, suggesting that some consumers prioritize quality control and the in-store experience over time savings.
Instacart’s IPO garnered significant attention, as IPOs have been relatively scarce in recent times. It was reported that Instacart was among the few venture capital-backed tech companies to go public since 2021, according to PitchBook. The company has secured over $2 billion in venture capital funding since its establishment in 2012.
Notable backers of Instacart included Whole Foods Market, which invested $30 million before being acquired by Amazon. Following the acquisition, Whole Foods terminated its delivery partnership with Instacart. Kroger and Albertsons also held stakes in Instacart, although it remained to be seen if they retained these stakes at the time of the IPO. Reports suggested that Albertsons stood to gain $80 million from its investment in Instacart.
Efforts to reach Whole Foods, Albertsons, and Kroger for comments were unsuccessful. The Cincinnati Business Courier reported Kroger’s history of investing in partner companies, including Ocado (an automated warehouse/grocery delivery enterprise) and Lucky’s Market (a supermarket chain), among others.
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