Instacart, Klaviyo Boost IPO Price in the Wake of Arm’s Blowout

Maplebear, more widely known as Instacart, the grocery delivery service that was founded in 2012 and reached its peak valuation two years ago, has raised its initial public offering price range from $26 to $28 per share to a new range of $28 to $30. The company is selling 14.1 million shares and has granted its underwriters an overallotment option of 7.9 million shares. At the new price, Instacart’s valuation will be around $9.6 billion.

At the midpoint of the new price range, Maplebear estimates net proceeds to the company of $640.9 million if the underwriters exercise their option. Company executives and existing shareholders are selling about 7.6 million shares in the IPO.

Two years ago, Maplebear/Instacart completed a funding round that raised $1 billion at a valuation of around $39 billion. That valuation was based on the company’s success during the COVID-19 pandemic when delivery services boomed while consumers stayed home.

As the pandemic was quelled by vaccines, the Federal Reserve began raising interest rates. That cooled the market for IPOs. According to Renaissance Capital, 397 IPOs priced in 2021, compared to just 71 last year. So far in 2023, 75 IPOs have priced.

In dollar terms, IPO proceeds topped $142 billion in 2021 and dropped to $7.7 billion in 2022. So far in 2023, net proceeds total $15.3 billion. Of that total, nearly a third was raised last week when Arm raised $4.87 billion.

A third big IPO is due next week when Klaviyo, a business software company, is expected to launch an initial offering of some 19.2 million shares in a price range of $27 to $29 to raise nearly $8 billion.

Klaviyo raised its IPO range by $2 on either end in an SEC filing Monday morning. The company’s portion of the take from the IPO is expected to be $296.2 million at the midpoint ($28) of the new range.

If, as expected, the Fed does not hike interest rates at its FOMC meeting later this week, will that have a further positive effect on the IPO market? Many Fed watchers do not expect any more rate hikes this year and are looking forward to rate cuts next year. If that happens, there could be a further uptick in IPOs.

Renaissance Capital has forecast a total of 110 IPOs for 2023, raising a total of $22 billion. That is nearly another $7 billion from about 35 more IPOs for an average net of $200 million per IPO. Not exactly the salad days of 2021, but nearly double the per-IPO net of 2022.

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