Instacart may say no to an IPO

Instacart may skip IPO and sell direct to public

Grocery delivery app Instacart, which was expected to go public early in 2021 through an initial public offering (IPO), is now mulling alternative options, including a direct listing, according to a Reuters report.

Reuters said bankers that have worked Instacart’s potential listing believe it could be worth at least $50 billion. On Tuesday, Instacart announced the closing of a $265 million venture capital fundraise that valued the company at $39 billion. The round involved existing investors Andreessen Horowitz, Sequoia Capital, D1 Capital Partners, Fidelity Management & Research Co. LLC, and T. Rowe Price Associates Inc.

“Today’s fundraising reflects the strength of Instacart’s business, the growth our teams have delivered, as well as the incredible opportunity ahead. This past year ushered in a new normal for millions of people and changed the way we shop for groceries and goods,” the company wrote in a blog post.

The Reuters report suggested that following the fundraise, Instacart is not in need of additional capital. The company would be the latest high-profile firm to spurn the traditional IPO route. Last year, Spotify went public in a direct listing. Seeking Alpha reported that video game platform Roblox, Coinbase Global, Klarna and Robinhood are all considering taking the direct listing approach.

In a direct listing, a company creates no new shares and simply sells existing shares to the public. There are no underwriters involved, so it reduces cost, but the company doesn’t generate any direct income from the sales of the shares. Anyone currently holding shares of the company can sell directly to the public and they receive the financial windfall, if any. There are usually no lockup agreements in this case.

Read: Instacart raises $265M, putting valuation at $39B

In an IPO, new shares are created and the company receives additional funding through the process, but there are more regulatory hurdles to overcome, and additional participants, including underwriters, who will help set the price for the stock.

Instacart has now completed 17 rounds of funding, according to Crunchbase, with a total of $2.65 billion raised. It completed three fundraising rounds in 2020, including a $200 million round in October, $100 million private equity round funded solely by T. Rowe Price in July, and a $225 million round in June.

Instacart, which more than doubled its workforce in 2020 to over 500,000, was valued at $17.7 billion in October when it closed its most recent round. Prior to the pandemic, its valuation was $2.5 billion.

Read: In first earnings as public company, DoorDash beats revenue forecasts

Competitor DoorDash (NYSE: DASH) went public on Dec. 9, 2020, pricing its shares at $102 each, and valuing the company near $60.2 billion. At the close of trading on the first day of trading, shares were up 85%. DoorDash shares were down 6.4% to $140.44 in midmorning trading Friday.

GrubHub (NYSE: GRUB) went public in 2014, pricing its initial shares at $26 per share and raising nearly $200 million in the offering. Its shares gained 31% on day one. Shares of GrubHub were off 1.28% at $58.46 in midmorning trading Friday.

Click for more Modern Shipper articles by Brian Straight.

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