LB Select
2023.09.18 07:30
I'm PortAI, I can summarize articles.

After the successful IPO of Arm, "American version of Meituan" Instacart has also arrived.

Instacart's valuation has taken a significant hit, and its current pricing implies a valuation of $9.6 billion. One year ago, in a late-stage venture capital round, the company was valued at $39 billion.

A knowledgeable source revealed that online grocery delivery giant Instacart has registered under the name Maplebear and will begin trading under the symbol "CART" on Tuesday. Like most IPOs, the company will set its price the night before going public and celebrate with its employees.

It is understood that Instacart's valuation has significantly decreased. However, with the success of chip design company Arm Holdings' IPO and the current trend of new stock listings, Instacart may achieve a higher valuation on Tuesday.

Significant Decrease in Valuation

In a filing submitted last Friday, Instacart priced its shares between $28 and $30, implying a valuation of $9.6 billion.

Last March, the company valued itself at $24 billion, and a year ago, in a late-stage venture capital round, its valuation was $39 billion.

The amount investors in the public market are willing to pay for Instacart depends in part on their confidence in the expansion and profitability of the so-called gig economy in the future.

Instacart uses contractors to deliver groceries to households. Based on the stock price and projected revenue for 2022, the company's price-to-sales ratio is 3.64-3.9 times.

Its closest competitor, DoorDash, has a price-to-sales ratio of 4.2, while other gig economy companies have lower ratios, with Uber at 2.8 and Lyft at 1.

How is the Business Performing?

Matthew Tuttle of Tuttle Capital said, "I think this valuation is reasonable." He uses Instacart every week.

Instacart was founded in 2012 and generated $2.55 billion in revenue last year, a YoY growth of 39%. The fees paid by retailers and customers, including those from its premium membership program Instacart+, account for nearly three-quarters of its revenue, with the remaining revenue coming from Instacart Ads.

The advertising business grew by approximately 30% YoY. The filing shows that retail partners typically sign contracts for less than a year and pay Instacart based on clicks and ad impressions or a fixed fee over a period of time. Instacart described advertising as "profitable" in its filing but noted that future ad revenue may fluctuate depending on its ability to attract new brands, customers, and expand into other markets.

David Hsu, a management professor at the Wharton School, said, "The advertising business is just getting started, and its performance remains to be seen." He believes that Instacart is "an ambitious attempt full of uncertainties." This grocery delivery company recorded losses in both 2020 and 2021. The net profit last year was $428 million, but over three-quarters of the profit came from what is known as tax incentives.