Updated with market reaction:

Grocery delivery company Instacart today saw its shares soar 40% in their debut in the public market, a day after it raised $660 million in its initial public offering.

The offering price of $30 a share topped an original guidance for $26 to $28 a share, but the shares opened trading at $42 a share, indicating avid interest by investors. The positive reception, which follows a big uptick in first-day trading by Arm Holdings Ltd. last week, signals a positive trend for IPOs, seen as one of the engines of the tech economy.

Instacart selling 22 million shares to investors ahead of the float. Some 14.1 million of the shares came directly from Instacart, while the remaining 7.9 million shares were from existing shareholders. Existing shareholders selling stock included Klaviyo Inc. — which itself is expected to price its IPO tomorrow — and Birkenstock Holding Ltd.

Bloomberg reported that in conjunction with the IPO, PepsiCo Inc. is buying $175 million of the company’s preferred convertible stock. Instacart is also said to have enlisted Norges Bank Investment AS, Technology Crossover Ventures L.P., Sequoia Capital L.P., D1 Capital Partners L.P. and Valiant Capital Management LLC as cornerstone investors, which could purchase up to 60% of the shares.

Instacart’s valuation of $139 billion at the opening is still way down from the company’s valuation of $39 billion as of a round of $265 million raised in March 2021. The valuation at the time was during the height of the COVID-19 pandemic when food delivery was booming because of lockdowns.

Founded in 2012, Instacart operates a food delivery platform that enables consumers to order food from 80,000 stores operated by more than 1,400 retailers in the U.S. and Canada. Delivery times range between 15 minutes and a few days, depending on the purchase.

Coming into its IPO, the company had processed $29.4 billion worth of grocery orders in the 12 months to June 30. In the period 2018 to 2022, merchandise purchased through Instacart had a compound annual growth rate of 80%, compared with a broader online grocery market that achieved a compound annual growth rate of 50% over the same time frame.

Unlike many companies going public, Instacart is actually profitable, generating net income of $242 million in the first six months of 2023. The company has not always been profitable, however, having reported a loss of $74 million in 2022.

Instacart’s sizable listing on the Nasdaq comes after chip design firm Arm went public on Sept. 13. Suggesting that there is a strong appetite among investors for IPOs, Arm saw its share price close 25% up on its first day of trading.

Reflecting the broader economic malaise in the global economy, often simply referred to as “macroeconomic conditions” by many, IPOs have rapidly declined in the last 12 to 18 months as companies — particularly tech companies — have held back on going public hoping for a change in economic conditions. The floats of both Arm, Instacart and Klaviyo do not change the broader economic outlook, but it is a positive sign that overall investing conditions may have turned a corner.

In an interview with theCUBE, SiliconANGLE Media Inc.’s livestreaming studio in February, Jeanette Barlow, vice president of product and retailer solutions at Instacart, discussed how the company helps U.S. vendors enter the digital age:

With reporting from Robert Hof

Photo: Instacart