Instacart stock languishes after IPO

Instacart saw its share price erode in the two days following its initial public offering, after it rose 12.7% in its first day of trading on the NASDAQ exchange.

The stock settled down to just slightly over its IPO price of $30 per share on Wednesday, its first full day on the exchange, then ranged between about $30 and $30.80 on Thursday. The current price values the grocery-delivery company at about $10 billion.

Analysts cited concerns about the company’s opportunities for growth amid stiff competition from other delivery companies and from self-delivering retailers such as FreshDirect and Amazon Fresh. In addition, investors have been bearish overall amid ongoing concerns about the economy and consumer spending, according to this Reuters report.

Instacart relies on gig workers who shop at and deliver from its various retail partners. It also provides ecommerce technology services to its retail partners and operates an ad network, the latter of which helped drive the company’s revenue and profit gains in the past year.

Bernie McTernan, an analyst with Needham who follows Instacart, said in a research note that he feels online grocery shopping faces “structural headwinds,” although he forecasted 12% annualized growth of grocery ecommerce over the next three years, according to reporting from Investors Observer.

Related:Instacart shares rise 12.7% in NASDAQ debut

“Consumers who have quality control fears or enjoy going to grocery stores do not consider time saving worth paying for,” McTernan said.

Instacart’s stock had been closely watched because IPOs have been scarce recently, and Instacart’s was reportedly one of the few venture capital-backed tech companies to have an IPO since 2021, according to a PitchBook report. The company had raised more than $2 billion in venture capital funding since its founding in 2012.

Among the companies that have provided financial backing to Instacart was Whole Foods Market, which reportedly had invested $30 million before Whole Foods was acquired by Amazon. Whole Foods ended its delivery partnership with Instacart shortly after the acquisition.

Both Kroger and Albertsons had also acquired stakes in Instacart, according to reporting by the Cincinnati Business Courier, although it was not clear if they still owned those stakes at the time of the IPO. The Courier cited a report in The Information noting that Albertsons was in a position to reap $80 million from its investment in Instacart.

Both Kroger and Albertsons declined to comment. Whole Foods could not be reached for comment.

As the Courier article also pointed out, Kroger has in the past invested in companies that it partners with. Those include automated warehouse/grocery delivery concern Ocado and supermarket chain Lucky’s Market, among others.