Capital Markets

Instacart Pulls IPO; CEO Says 2022 Listing Unlikely

The volatile stock market is making CFOs and CEOs jittery about potential listings.
Vincent RyanOctober 21, 2022
Instacart Pulls IPO; CEO Says 2022 Listing Unlikely

Grocery delivery company Instacart has shelved its plans for an initial public offering this year.

In a memo to employees on Thursday, Fidji Simo, chief executive of Instacart, wrote that turbulent market conditions make a stock exchange listing in the fourth quarter unlikely, reported the New York Times and the Wall Street Journal today.

“The markets still remain closed for new IPOs, which is why there has not been a tech IPO in the last 10 months,” Simo wrote in the memo, according to the WSJ. “We do not need a perfect market, we’re just looking for an open market window.”

Fidji Simo, CEO of Instacart

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

According to a Bloomberg report last week, Instacart has cut its valuation almost in half since March, to $13 billion.

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

According to Instacart’s announcement of his appointment, Giovanni advised tech companies on some of the largest financial transactions and public offerings of the last two decades, including Airbnb, Square, Twitter, Yelp, DoorDash, and Snap.

Deal Drought

Unsettled market conditions have kept many U.S. 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 drastically slow the pace of new listings.

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

The Renaissance IPO Index — a basket of the largest, most liquid U.S.-listed newly public companies — has fallen 51% for the year as of Thursday’s close. The only IPO to price this week was biotech Prime Medicine, which sold 10.3 million shares at $17 apiece. As of Friday afternoon, the shares were trading at $16.92 after opening at nearly $19.

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

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

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

A report from Renaissance noted two other historical IPO slowdowns in the past 20 years. In the wake of the dot-com bubble, the Nasdaq declined 78%, “dampening IPO activity for about three years,” the research firm noted. And during the financial crisis, the Nasdaq declined 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.”