Instacart IPO update: Lower valuation means stock could pop on listing day

Instacart is reducing the size of its order—significantly.

The grocery delivery company, which recently filed paperwork with the Securities and Exchange Commission (SEC) as it prepares to go public, submitted an updated filing in which it has revised its valuation. The updated filing, sent to the SEC on Monday, says that the company is looking at a valuation of around $9 billion—a range between $8.6 billion and $9.3 billion, to be exact. That’s a dramatic decrease from two years ago, when Instacart was valued at around $39 billion during a 2021 fundraising round. It’s also significantly less than the $24 billion valuation the company was eyeing in 2022. 

In all, a valuation of $9 billion represents a cut of almost 77% from two years ago. 

Instacart’s shares are expected to start trading on the Nasdaq under the “CART” ticker as early as next week, and the company planned to kick off its IPO roadshow on Monday. The IPO could still be the bigger—and, regardless, it’s likely to be one of the most notable of the year—but the revised valuation is sending a message to investors to reset expectations. Last week, chipmaker Arm also set a renewed valuation as it prepares to IPO, too.

While a significant drop in pre-IPO valuation may be construed as a bad sign to potential investors, it could also be a part of a larger strategy. For instance, The New York Times reports that it’s not unusual for companies to IPO at lower valuations with hopes of setting expectations, and raising them as the process plays itself out; it could be a way for a company to see its share prices pop after they hit the market, rather than fall, and avoid an “embarrassing misreading of the market.”

With that in mind, it’s worth noting that Instacart has the wind in its sails. It’s profitable, for one, with its second-quarter 2023 prospectus showing $114 million in net income on revenue of $716 million. During the first quarter of the year, the company brought in $128 million in net income on $759 million in revenues. It also showed that last year, the company turned a $242 million profit after losing $74 million the year prior.

Further, it has the backing of big investors, such as PepsiCo, and is working with 1,400 retailers and 80,000 stores across the country. To add to all of that, its ad business is proving to be lucrative, too, with advertising revenue up 24% during the second quarter.

And, as noted, a lower valuation may mean that the stock has room to run once it hits the markets—something investors may want to keep an eye on.