Why Instacart’s IPO Ambitions Matter

Eyeing an IPO

Despite a somewhat frozen market for initial public offerings, Instacart is eying an IPO before the end of 2022. Given the overall sour economic sentiment, many investment banks are advising private companies, especially unprofitable ones, to sit on the sidelines until conditions improve.

In May, Instacart confidentially filed for an initial public offering just a couple of months after cutting its valuation by nearly 40%. Instacart was initially leaning towards a direct listing. In this situation, a company doesn’t raise money, it simply starts trading on an exchange. Now Instacart is considering a traditional IPO.

Times Have Changed

The early stages of the pandemic gave Instacart a boost. The company grew at a massive clip as many people turned to the service while they were sheltering in place and attempting to social distance.

Times have changed, however, and competitors have also put pressure on Instacart. Other companies like DoorDash (DASH) and Uber (UBER) also expanded into food delivery. More broadly, people are venturing back out to restaurants and bars, making them less reliant on delivery services.

Open Floodgates or Closed Door?

If the US-based grocery delivery and pick-up service does decide to carry out its plans, the roadshow and public reception would capture Wall Street’s attention. Other companies thinking about going public might jump-start or delay their plans depending on the success of its offering.

As of June, over 300 other companies are watching and waiting on the IPO sidelines. This is according to a Nasdaq spokesman who said hundreds are on file with the Securities and Exchange Commission for an IPO. Between slowing US growth, rampant inflation, and consistent market volatility, many are biding their time. A successful IPO from Instacart could open the floodgates for other firms to follow suit. A failed public offering could close the door until next year.

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