Instacart Prepares for IPO Amid Volatile Markets, Changing Consumers

The filing comes at a challenging time for Instacart amid a volatile stock market, and reflects optimism among some companies and their advisers that the choppy stock and IPO markets may be temporary. The S&P 500 is flirting with bear-market territory, defined as a fall of 20% or more from recent highs, and fast-growing unprofitable companies have faced even steeper drops. Traditional U.S.-listed IPOs have raised just $4.1 billion in 2022, the worst start to a year since 2016, according to Dealogic.

Given the volatility and poor performance of recent offerings, fund managers who buy new listings are saying they are mostly interested in large, profitable, well-known companies.

Even that isn’t a guarantee. Last week, eye-care company Bausch + Lomb Corp., a profitable, well-known carve-out of

Bausch Health

Cos., attempted to be the first big company to go public since January. The IPO priced well below expectations. The stock initially rose in its stock-market debut, but has since tumbled roughly 10%. The poor performance is acting as a deterrent for other companies considering IPOs in the near term, according to people who advise IPOs.

Instacart declined to comment about its IPO plans. The company’s chief executive, Fidji Simo, wrote in a memo to employees Wednesday that markets always ebb and flow, and that while the company can’t control external factors, it can control business fundamentals.

Growth has slowed for Instacart recently, partly as consumers shift back to their prepandemic behaviors and competition intensifies. The company in March cut its valuation to $24 billion, citing market turbulence affecting public and closely held technology companies.

Online grocery sales declined nearly 4% to $8.1 billion in April from the same month a year ago, according to research firm Brick Meets Click. Delivery-related sales fell 6% while pickup sales dropped less than 3%.

The pandemic provided a major boost to Instacart and other delivery apps, with Instacart’s sales growing 330% from 2019 to 2020, according to research firm 1010data Services LLC. In 2021, the company’s sales increased by 15%, and supermarkets said foot traffic to stores has grown in recent months as consumers resume shopping in person.

Some companies are encouraging in-person shopping, which remains the most profitable for supermarket operators as it doesn’t carry additional labor or transportation fees. Grocers also now have more delivery providers to choose from and are able to negotiate better deals, industry executives have said. Many retailers are using several services to reach broader groups of customers.

Meanwhile, food delivery remains highly competitive.

Just Eat Takeaway.com

NV said in April that it was exploring a sale of Grubhub, which delivers food from restaurants and some convenience stores, and that the U.S. business reported a decline in orders.

Other technology companies, including those that received a pandemic boost, have acknowledged weaker demand or shown caution in recent months.

Uber Technologies Inc.,

which operates food-delivery service Uber Eats, recently said it would pull back on hiring and spending on marketing to focus on profitability.

Netflix Inc.

said it lost subscribers in the latest quarter, and is exploring a lower-priced version of the platform.

In response, investors have punished those stocks, both for their specific challenges and, more generally, as they sell risky stocks. Netflix’s stock is down more than 70% in 2022, while Uber’s has lost more than 40%.

The pandemic initially fueled growth at Instacart, cementing it as the biggest grocery-delivery company. The company raised more than $265 million in March 2021 from investors at a $39 billion valuation. Instacart also began delivering from nonfood retailers such as

Best Buy Co.

Inc. and expanded its advertising business, an effort to boost sales and offset costs associated with delivery.

In 2021, Instacart named Ms. Simo, a longtime executive at Facebook parent Meta Platforms Inc., as its new CEO.

Apoorva Mehta,

co-founder and former CEO of Instacart, became executive chairman of the board, saying at the time that Ms. Simo would help take the company public and expand its business.

Mr. Mehta and Ms. Simo last year also discussed possible deals with competitors

DoorDash Inc.

and Uber, people familiar with the matter previously said.

In March, Instacart told employees it would cut its valuation, citing market turbulence, though Ms. Simo told employees then the move didn’t affect the company’s plans to go public.

Write to Jaewon Kang at [email protected] and Corrie Driebusch at [email protected]