The IPO Buzz: Instacart (CART) Jumps 40 Percent in its NASDAQ Debut

Instacart (CART) shares shot up 40 percent to open at $42.00 – up $12.00 from their $30.00 IPO price – in their NASDAQ debut at 12:49 p.m. EDT today (Tuesday, Sept. 19, 2023),  NASDAQ records showed. Volume was about 2.59 million shares on the opening trade, according to NASDAQ. Instacart’s stock rose as much as 43 percent to a session high so far of $42.95 in the first few minutes, pushing its valuation on a fully diluted basis up to about $14 billion, according to Bloomberg. By the closing bell, Instacart’s stock had given up some gains to end its first day of trading at $33.70 – up $3.70 or 12.33 percent – on volume of about 38.7 million shares.  Instacart’s stock rallied while the three major U.S. stock indexes fell on Tuesday, the day before the Fed was expected to announce its latest interest-rate decision.

Instacart’s 40 percent surge at its first NASDAQ trade exceeded the performance last Thursday (Sept. 14) of Arm Holdings Ltd. (ARM), which opened 10 percent above its $51.00 IPO price. Arm’s stock closed its first day of NASDAQ trading with a 25 percent gain. 

Instacart priced its IPO at $30.00 – the high end of its recently raised price range of $28.00 to $30.00 – on Monday night (Sept. 18, 2023). The online grocery delivery pioneer sold 22.0 million shares – the same number of shares in the prospectus – at $30.00 each to raise $660.0 million in the IPO. The word on the Street was that allocations were exceptionally tight.

Goldman Sachs and J.P. Morgan led the joint book-runners’ team, which included BofA Securities, Barclays, Citigroup, JMP Securities, LionTree, Oppenheimer & Co., Piper Sandler, SoFi and Stifel.

The high-end pricing gave Instacart a valuation or a market cap of about $8.29 billion. Bloomberg reported that Instacart’s valuation was about $10 billion on a fully diluted basis. based on the IPO price of $30.00.

Instacart had lingered on IPO investors’ “watch list” for at least two years. The San Francisco-based tech unicorn’s IPO attracted a tremendous amount of interest, especially in the wake of Arm Holdings Ltd.’s(ARM) successful IPO last week.

Early Friday (Sept. 15, 2023), Instacart woke up Wall Street with the news that it had raised its IPO price range to $28.00 to $30.00 – up from $26.00 to $28.00 initially – and kept the number of shares at 22.0 million. (Source: S-1/A filing)

Cornerstone investors, including principal stockholder Sequoia Capital, had indicated interest in buying up to $400 million of stock in the  IPO,  according to the prospectus. The cornerstone investors’ potential orders amounted to about 63 percent of the IPO.

For IPO investors, Instacart’s appeal was simple.

“It makes money,” a seasoned IPO trader says.

Instacart earned net income of $596 million on revenue of $2.9 billion for the 12 months that ended June 30, 2023.

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Disclosure: Nobody on the staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The staff does not issue advice, recommendations or opinions.

Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums) is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute changes due to market conditions, changes in a specific offering and other factors, such as changes in the proposed offering terms and the shifting of investor interest in the IPO. The information offered is taken from sources we believe to be reliable, but we cannot guarantee the accuracy.