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How 2020 transformed the grocery business

Yahoo Finance’s Julie Hyman, Myles Udland, and Brian Sozzi discuss the grocery industry amid COVID-19.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Myles Udland here in New York. And about 15 minutes away from the opening bell here on this Friday morning, on the end of the last full week of trading in the year 2020. Of course, Christmas next Friday, and then we will have New Year's Day two weeks from today.

Well, this year we've talked so much about IPOs, new companies coming to market. We're going to talk to someone sponsoring a SPAC later on in this hour. And yesterday we saw the news from Coinbase, that they had filed their S1 with the SEC.

Now, considering it's a confidential filing, we know that Coinbase has less than $1 billion in revenue. Of course, that rule allows companies to file with the SEC if that's where their revenue run rate is below. But, of course, I guess, Julie, we should just get it out of the way to start, right? The joke that Coinbase, the Bitcoin exchange operator is going to, I guess, list in US dollars on the New York Stock Exchange. And that is the way that everyone there will eventually kind of realize their investment.

JULIE HYMAN: I mean, there was some talk about them listing in tokens at one point, selling tokens and coming public in that way. In fact, I think that one of the folks associated with the company said, sort of philosophically that that would make the most sense for Coinbase to do a coin offering rather than a stock offering as a way of going public. But it doesn't seem they're going that way. It seems as though dollars are the way to go, at least in the short term until we are all living in the crypto future, whenever and if ever that happens.

The company's latest private round valuation was about $8 billion. There was also some talk about them and debate about whether they would do a direct listing or do an IPO. But with this filing it looks like I think that they're going in that IPO direction.

So yes, some ironies here. But, of course, what also needs to be said is they're talking about going public with Bitcoin above $20,000. So could that change very quickly? It has before. So then what happens to the prospects for the IPO? I don't know the answer to that one either.

BRIAN SOZZI: Well, I'll-- let me jump in here real quick too. I think obviously when this eventually comes to market, investors have to do their due diligence, understand the company. If they could, in fact, see if they could be profitable at some point. Maybe they're profitable now. Unclear.

But I will say this. Coinbase just announced, I believe it was yesterday afternoon, former Cisco CFO, Kelly Kramer, is now joining their board. I have gotten to know Kelly through the years through her time at Cisco. She also recently joined the Snowflake board. She just left Cisco as CFO. I don't think a Kelly Kramer joins a board of a Coinbase if she doesn't think this is a serious company with serious long-term potentiation. She's one of the most respected CFOs in the game.

JULIE HYMAN: I want to switch gears and talk about another company that may be coming public in the new year. And that is Instacart, which, Myles, you wrote about in the Yahoo Finance morning brief, not so much because of the pending IPO. Although, that's certainly part of the story. But more because Instacart is one of the more sneaky, maybe, plays that we have seen this year.

I mean, we've talked a lot about DoorDash and Airbnb, and their trajectory over the course of the year. We've talked a lot about work from home. Instacart has sort of quietly crept up there. And it's seemingly taken market share from even bigger companies like Walmart.

MYLES UDLAND: Yeah, I mean, I think that's the real takeaway here is that in a year where you knew there would be a huge boom in online grocery shopping or delivery-- I mean, Instacart, you can do it, you know, both ways. But I mean, I think what's interesting is that there has been one main winner, it seems, at least based on the data that we're looking at, which comes to us from Dan Frommer over at "The New Consumer."

You know, app downloads obviously exploded at the beginning of the pandemic. But we showed that-- this chart here, which is the year over year change in spending on the platform versus other online grocers. And it essentially says that in a category that's growing several hundred percentage points over last year, almost all of those gains are accruing to Instacart.

And so we see another dynamic in sort of this app powered, software based new economy, if we want to call it that, where the gains tend to accrue to one major player. And the comparison I use in the piece-- and you know, this is not particularly novel, and some people probably think it's sort of a lazy trope to use anyway, but Instacart is, as far as I'm concerned, on the path to becoming a verb.

When you think of I'm going to stream stuff on my TV, people usually think I'm going to Netflix that, or I'm going to watch Netflix. People will say, "I'm going to watch Netflix," even if they then go and watch HBO Max, for example, right? People will say, including myself, "I'm going to get an Uber." I actually don't use Uber at all because my rating stinks. I only use Lyft, because I'm a Lyft Pink member through Chase and all that stuff. So-- but I will still say, "I'm going to get an Uber," because that's sort of the colloquialism as it is, right? That cements, in my view, Uber's primacy as the ride hailing app.

And I think Instacart is clearly on that trajectory. And they are probably going to be, along with Coinbase, the big, buzzy consumer name that goes public next year. I mean, everyone's waiting for DoorDash and Airbnb. I don't think Coinbase and Instacart have quite the same consumer awareness that those two brands have. But you know, at this point in the cycle the names coming public get a little more-- how should we say? Like sassy? Like under the radar, here's a software company you can't really explain, you know, like your Snowflakes, for example. More of those likely to come public next year. So Coinbase and Instacart are probably the two that people recognize the most when they do indeed make their debuts.

BRIAN SOZZI: Myles, you got to be nice to the Uber drivers. Let's get that rating up here in 2021. What's going on? But you know, just playing off what you wrote in the newsletter, really it was a really great read, I would suggest, does Instacart even become a public company? Does a retailer? Does a Walmart? Does a Target go out there and buy them before they go public? Because, to your point, I think they are going to become a verb and an essential service.

Let's keep in mind, Target a couple of years ago bought Shyp, same-day delivery service. Costco just paid big up to buy Innovel. It's almost, I would say a little bit like an Instacart player, not well known, but it could be a retailer steps up, and opens up their checkbook, and buys the company.

MYLES UDLAND: Yeah, it's interesting, Sozzi. I mean, part of, you know, what Frommer's bull case at least for Instacart is is that they work with 500 retailers, right? They get to be the, you know, kind of spoke in that system.

And, you know, you think about a company that's been in the news the last couple days, Roku, right? Roku loves its position, because they are the arms dealer, in a sense. And I think Instacart likes that position.

So sure, you could always come in and offer someone $100 billion, and they'll probably take it versus going public at a valuation at a third of that. But if I'm Instacart's investors, if I'm an Instacart, you know, executive and I'm looking at our execution plan, I don't really think I want any part of being, you know, purchased by Walmart or whatever, even if they come in with some huge number, which ultimately they probably won't do, right? There's going to be some discretion in how they're allocating their capital.

So very interesting story to follow next year. And again, IPO wave likely to continue as we get into 2021. All right--