Instacart’s stock increases by 12% on its first day on the Nasdaq, despite initial momentum slowing down

Instacart, a well-known grocery delivery service, recently began its journey on the U.S. stock market. By the end of its opening day, the company’s valuation stood at just over $11 billion. This is particularly notable when considering that its value was once pegged at a staggering $39 billion. Those interested in tracking the company’s stock market performance can find it on the Nasdaq under the symbol “CART.”

On its debut day on the Nasdaq, Instacart’s stock witnessed an impressive 12% rise. The excitement was palpable as the stock’s price initially surged by 40% to hit $42. However, as the day progressed and investors secured their initial profits, the price settled at $33.70. When the shares were initially offered, Instacart’s valuation was approximately $10 billion—a sharp decrease from its $39 billion valuation in the early days of 2021.

Historically speaking, Instacart’s public debut is significant. It is the first major venture-backed company to go public since December 2021. The company’s roots can be traced back to 2012 when it embarked on a mission to deliver groceries from prominent chains, including the likes of Kroger and Costco. To garner the interest of public market investors, the company had to make a considerable adjustment to its stock price. Back in 2021, during the pandemic’s peak when home deliveries skyrocketed, Instacart successfully raised funds at $125 per share.

In terms of its business strategy, recent times have seen Instacart prioritizing profitability over rapid growth. This strategic shift became evident when the company reported a revenue increase of 15% in the second quarter, which amounted to $716 million. Although this growth percentage is commendable, it pales in comparison to the company’s previous growth rates. In its pursuit of profitability, Instacart also made some tough decisions, including reducing its workforce and cutting certain operational costs in 2022.

Financially, the second quarter of 2022 marked a significant milestone for Instacart as it began registering profits. The company reported a net income of $114 million, a stark contrast to the $8 million from the year before. When analyzing the market landscape, Instacart’s valuation is approximately 3.9 times its annual revenue. This positions it in close competition with DoorDash and even Uber’s food delivery segment, Uber Eats.

In the broader market, Instacart faces stiff competition. Giants like Amazon and traditional brick-and-mortar retailers such as Target and Walmart, which have established their own delivery frameworks, are challenging Instacart’s dominance. A testament to this competitive environment is Target’s acquisition of Shipt in 2017 for $550 million.

Interestingly, a mere 8% of Instacart’s total shares were available for public purchase during its debut. Of these, 36% were from existing shareholders. Instacart’s CEO has emphasized that this public offering was not a strategy to raise capital. Instead, it was a move designed to benefit the hard-working employees by offering them liquidity on their stocks.

The public offering has undoubtedly boosted Instacart’s financial standing. The company added over $420 million in cash to its coffers, complementing the nearly $2 billion in cash and equivalents it already had by the end of June.

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