Down Goes Instacart

🛒🚗🏠 Instacart, the on-demand grocery delivery service, is voluntarily cutting its valuation from $39 billion to $24 billion, Bloomberg first reported late on Thursday.

• The company isn’t publicly traded, so the ~40% drop is reflected in the company’s 409a valuation, an internal measure used to price employee and investor shares.
• The pandemic initially turbocharged its business, as people avoided going to physical stores and turned to grocery delivery. But high transportation and labor costs have kept delivery expensive, and consumers are increasingly returning to in-person shopping – changes that have been reflected in publicly-traded companies' share prices, but not Instacart's.
• Bloomberg reported that the company brought in $1.8 billion revenue last year, which at the updated valuation equates to a 13.3x trailing revenue multiple. Pre-adjustment, it would’ve been 21.7x.
• Instacart is hoping the updated valuation will help it attract and retain talent by aligning new equity awards, effectively issuing more shares to employees at a lower price. Per the company, 2021 was a banner year for number of orders, revenue, ad revenue and gross profit; it also has more than $1 billion in cash and securities on-hand.

📉 Zoom out: As alluded to earlier, other publicly-traded companies in the ad and delivery businesses, like Shopify, DoorDash and Meta, have seen their share price decline recently. And there could be more bad news on the horizon for some highly-valued tech stocks.

• “With [record-high inflation and interest] rates climbing, this adds risk to higher multiple software stocks trading over 20 times revenue,” according to a recent 2022 outlook report by JPMorgan.