The Rabid Capitalist

Professor Glenn A. Okun

Arm now has company.  Instacart, another grossly overvalued company, is scheduled to hold its road show this week.  The IPO’s expected valuation of $9 billion, a fraction of its $39 billion valuation in a private funding round in 2021, is the latest sign of the weak interest in private growth companies.  Put another way, another unicorn gets its horn broken.

This one was a foreseeable disappointment.  Founded eleven years ago, it delivers groceries.  In their pursuit of this low-valued added service, the company has required in excess of $2 billion in venture capital funding.

It is no surprise that its delivery business is suffering declining growth rates.  Instacart’s revenue increased by about 31% to $1.5 billion, with the number of orders remaining relatively flat year over year. Revenue from advertising and other businesses rose by about 24% in the period.

If the deal is completed, Fidelity, T. Rowe Price and D1 Capital Partners, the proud owners of the 2021 round with the $39 billion price tag, will have to take a 77% write down on their cost.

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