Instacart, a leader in the online grocery delivery industry has filed for its public debut. Its move is complemented by an enticing twist. PepsiCo Inc., the powerhouse that ranks atop the Transport Topics Top 100 list of North America’s largest private carriers, is set to invest a substantial $175 million in preferred convertible stock.
The delivery service was founded back in 2012, and its decision to go public has been on the cards for a while. Seizing the momentum provided by the pandemic-driven surge in online grocery shopping, Instacart is hoping for a successful IPO launch.
Meet the IPA
In a filing unveiled last week, Instacart, known legally as Maplebear Inc., dropped a bombshell: the company managed to achieve a profit during the first half of the year. This comes as a pleasant surprise, especially considering the rough economic landscape in recent times.
While Instacart remains coy about revealing the proposed price and size of its share sale, the market is excited. This announcement could potentially infuse renewed energy into an IPO market that has been turbulent of late.
Zooming in on Instacart’s journey
Back when it was a startup, Instacart managed to amass a substantial $2.74 billion in funding, reaching a valuation of $39 billion in 2021, as per data provider PitchBook. However, the ebbing of the pandemic also saw a decline in Instacart’s growth trajectory. The company’s valuation suffered, plummeting three times over the course of last year to settle at around $13 billion by October.
Big-name backers like Sequoia Capital and D1 Capital Partners are among Instacart’s leading investors, according to the filing. This financial web also includes heavyweights like Tiger Global Management and Coatue Management, as indicated by PitchBook.
At the helm is Chief Executive Officer, Fidji Simo, a seasoned veteran from Facebook’s product division. Simo takes over from co-founder Apoorva Mehta.
Looking ahead
The company’s strategy to fortify brick-and-mortar supermarkets like Kroger and Wegmans with e-commerce capabilities has paved the way for growth.
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Despite the mammoth $1.1 trillion U.S. grocery industry, a mere 12% of sales currently transpire online.
This means Instacart has been exploring fresh revenue streams. It’s ventured into catering and stocking provisions for small- to mid-sized businesses, alongside a health-focused arm delivering food and nutritional programs.
The Instacart Marketplace, a consumer-facing realm powered by over 600,000 independent contractors (referred to as shoppers), spans a vast network of more than 1,400 retailers across 80,000 North American stores, including industry titans like Kroger, Publix, and Walmart. While the core business segment growth has stabilized, Instacart managed to maintain consistent orders.
The nitty gritty
The company’s financial report card for the first half of this year reveals a 4% uptick in gross transaction value, soaring to $14.9 billion. In this arena, Instacart faces fierce competition, with DoorDash significantly gaining ground in orders under $75.
However, Instacart retains its stronghold in large orders (over $75), and the competition spans giants like Uber Eats, Amazon.com, and Walmart’s expanding e-commerce ventures.
Industry observers weigh in, and according to Alex Frederick, an analyst at PitchBook, “Instacart is entering the public markets at a time of cautious enthusiasm.” Frederick applauds the strategic moves, including food-stamp payments and the Instacart+ membership program.
As the dust settles on the financial front, Instacart’s revenue witnessed a 31% surge to approximately $1.5 billion in the first half of the year. This growth was thanks to its advertising segment.
The company’s net income for H1 2023 stood at $242 million, in stark contrast to a $74 million loss for the same period the previous year. Instacart also managed to bolster its profit margin, with net income as a percentage of gross transaction value climbing from a loss of 0.3% in 2021 to a profit of 1.5% in 2022.
Taking the reins for this IPO endeavor are heavyweight firms Goldman Sachs Group Inc. and JPMorgan Chase & Co. As Instacart gears up to enter the public trading arena, all eyes are on the Nasdaq Global Select Market, where its shares are set to debut under the symbol CART.
About the author
Marce has contributed tech to various prominent publications since 2018, offering a transparent perspective into the tech industry and its effects on its users. She now spends her time developing insightful content for industry players. You know, when she's not gaming or geeking out about the latest fad.
