Instacart Pulls IPO; CEO says 2022 listing unlikely

Grocery delivery company Instacart has shelved plans for an IPO this year.

In a memo to employees Thursday, Fiji Simochief executive of Instacart, wrote that market turmoil made a fourth-quarter listing unlikely, The New York Times and the the wall street journal today.

“Markets still remain closed for new IPOs, which is why there have been no tech IPOs in the past 10 months,” Simo wrote in the memo, according to the WSJ. . “We don’t need a perfect market, we just want an open market window.”

Fiji Simo, CEO of Instacart

Instacart would not comment on the status of the IPO for Axios, but released a statement to the media that “our business has never been stronger…we remain focused on the long term.” Simo’s memo noted that in its most recent quarter, revenue was up more than 40% from a year ago and gross profit was up more than 45%.

According to a Bloomberg report last week, Instacart cut its valuation by nearly half since March, to $13 billion.

Instacart’s CFO has been touted as an “IPO expert”. CFO Nick Giovanni came in the spring of 2021 after 23 years at Goldman Sachs. He was the last head of Goldman’s technology, media and telecommunications group.

According to Instacart’s announcement of his appointment, Giovanni has advised technology companies on some of the biggest financial deals and public offerings of the past two decades, including Airbnb, Square, Twitter, Yelp, DoorDash and Snap.

Coping with the drought

Unstable market conditions have kept many US companies on the sidelines. The CBOE Volatility Index stood at 29.8 on Friday, up from its September average of 27.4. Any reading above 20 tends to significantly slow the rate of new registrations.

Only 26 U.S. IPOs hit the market in Q3, raising $2.4 billion, according to Renaissance Capital, provider of an IPO ETF. This is the third slowest quarter since 2011.

The Renaissance IPO index – a basket of the largest and most liquid newly listed companies in the United States – fell 51% for the year to Thursday’s close. The only priced IPO this week was biotechnology Prime Medicine, which sold 10.3 million shares at $17 apiece. On Friday afternoon, shares were trading at $16.92 after opening near $19.

The market was eagerly anticipating the IPO of Intel’s standalone Mobileye unit this week, but it didn’t happen. On Tuesday, the company announced was targeting a $16 billion valuation, less than a third of what it previously projected. It was aiming to raise $779 million at that valuation.

The deal that was supposed to open the IPO window was the listing of AIG’s pension services business, Corebridge Financial. The listing raised $1.7 billion on September 15, but on Friday the shares were trading just $1.50 a share above their opening price.

This year is on track to be the slowest for IPOs in more than a decade, according to Renaissance.

A Renaissance report noted two other historic downturns in IPOs over the past 20 years. In the wake of the dot-com bubble, the Nasdaq fell 78%, “damping IPO activity for about three years,” the research firm noted. And during the financial crisis, the Nasdaq fell 56% from peak to trough, shutting down the IPO market for nearly two years.

In each case, Renaissance said, “activity normalized after the Nasdaq rallied 45% to 55% from the bottom.”

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