Initial public offerings are back, warts and all.
Shares of the grocery delivery company Instacart opened for trading on Tuesday at $42, up 40 percent from their initial public offering price of $30. The performance signaled that investors are eager to take a chance on young tech companies — but only at the right price.
Instacart’s market capitalization, including all outstanding shares, totaled $13.9 billion. But even with the stock price pop, the company’s valuation remained a far cry from the $39 billion that investors assigned it in the private market in 2021. It was a painful loss to investors who had bought in at that peak, sending a harsh reality check to other start-ups that raised money at inflated valuations.
Fidji Simo, Instacart’s chief executive, said the valuation reflects the changes in public stock prices, even as the company has improved its performance in the last two years, including by turning a profit.
“The markets will always ebb and flow,” she said, adding that she was more focused on what she could control.
The tech and finance industries had eagerly anticipated new I.P.O.s in hopes they would usher in more listings. Inflation and rising interest rates, alongside a broader downturn marked by layoffs and other cuts, deepened investor skepticism of tech companies, leading to a virtual freeze in I.P.O.s for the past two years.
Just 144 companies went public in the United States in that time, raising $22.5 billion, down from 397 I.P.O.s that raised $142 billion in 2021, according to Renaissance Capital, which tracks new listings.