The shares of food delivery service Instacart (CART.O) dropped 5% on Wednesday as it joined other newly listed companies in failing to maintain their big debut gains.
Investors had hoped that a recent flurry of fresh listings would revive the IPO market following a nearly 18-month dry spell, but with ongoing concerns about inflation and rising interest rates, shares of chip manufacturer Arm and RayzeBio (RYZB.O) have fallen from their debut highs.
According to Mark Luschini, chief investment strategist at Janney Montgomery Scott, the market appears uncertain about whether the current state of the economy can sustain the high valuations of those IPOs.
As individuals continue their entrenched habits of purchasing groceries online, Instacart, which includes Costco Wholesale (COST.O), Kroger (KR.N), and Aldi among its retail partners, has witnessed an increase in orders despite the pace decreasing from epidemic highs.
According to Stuart Cole, a chief macroeconomist at Equiti Capital, “We are seeing the realization that consumers are still experiencing a cost of living crisis as well as that their willingness to pay an additional fee for home deliveries may be weaker than assumed.”
In its Nasdaq debut on Tuesday, the San Francisco-based company’s shares closed 12% higher but were unable to hold onto a 43% intraday increase, and were currently trading at $32. The business was valued at close to $9.9 billion after its initial public offering on Monday.
Alex Frederick, senior emerging technology analyst at PitchBook, predicted that the company would face difficulties in maintaining margin expansion and revenue growth while dealing with elevated food price inflation and increased competition from traditional grocers, Walmart, and Amazon.
Instacart reported in its IPO filing that its overall revenue for the six months ending June 30 increased 31% year over year while gross profit increased 44%.
The corporation began making plans to go public approximately three years prior to the listing. PepsiCo (PEP.O), which has committed to purchase $175 million in preferred convertible stock, expressed interest in the company in August.