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Instacart stock soars in debut, then pares gains

Instacart (CART) stock began trading on Tuesday, opening at $42 per share on the Nasdaq.

The grocery delivery app had set a price of $30 a share for its IPO, valuing it at roughly $10 billion. The stock rose more than 40% just after it began trading before receding throughout the afternoon to close its first day of trading up 12%.

Instacart's IPO follows Arm's (ARM) return to the public markets less than a week ago. After the chip designer's IPO was initially welcomed by investors with the stock rising more than 20% during the first trading session, shares are now down more than 8% since the IPO day.

Instacart raised its pricing range into the IPO following Arm's strong listing, sparking discussion about whether these public offerings could reinvigorate what's been a dormant market over the past year. In 2021, 1,010 IPO deals were made per Dealogic. In 2022, that decreased to 173.

IPO experts told Yahoo Finance Instacart could serve as a better barometer for an IPO market comeback because of how different its business is from Arm. Valued at $54.5 billion, Arm was the biggest IPO of 2023. The well-established chip designer, which has traded on the public markets previously, says it powers 99% of premium smartphones.

Instacart, on the other hand, will be publicly traded for the first time. Founded in 2012, Instacart's valuation rose to $39 billion in 2021 as excitement around grocery delivery grew during the COVID-19 pandemic. The company connects consumers with gig economy workers who pick out their orders at grocery stores and deliver them.

Instacart never went public during the 2021 IPO craze, though. Instead, it went public Tuesday with a valuation more than 70% lower than its peak.

The company believes it's at the center of a "massive digital transformation," Instacart CEO Fidji Simo said in the S-1 filing. The market for grocery delivery hasn't reached its full potential; just 12% of grocery sales are made online, per the filing.

"As even more people shop online, online penetration could double or more over time," Simo said.

Instacart believes advertising sales can be a part of its next leg of growth rather than just direct sales to customers. The company reported revenue of $1.48 billion in the first half of 2023, up 31% from the same period a year prior. Advertising accounted for 28% of that revenue.

SAN ANSELMO, CALIFORNIA - AUGUST 28: Instacart gift cards are displayed at a Safeway store on August 28, 2023 in San Anselmo, California. Grocery delivery company Instacart filed for its initial public offering on Friday with hopes to start trading on the Nasdaq by next month. (Photo by Justin Sullivan/Getty Images)
Instacart gift cards are displayed at a Safeway store on Aug. 28, 2023 in San Anselmo, Calif. (Justin Sullivan/Getty Images) (Justin Sullivan via Getty Images)

Josh Schafer is a reporter for Yahoo Finance.

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