Instacart stock gets 'choppy reception' from investors after IPO

Instacart stock (CART) briefly fell below its IPO price.

Shares of the grocery delivery company were down nearly 11% as of the market close on Wednesday. The stock was still under pressure in premarket trading on Thursday but rose over 3% to trade around $31 at the market open.

The stock's move comes just two days after the grocery delivery company made its public debut.

On Tuesday, Instacart went public on the Nasdaq. Shares opened at $42, 40% higher than the anticipated $30 a share, which put the company's market valuation at roughly $13.9 billion.

Instacart's market cap as of premarket trading on Thursday was roughly $8.33 billion.

"It's definitely been a little bit of a choppy reception," Renaissance Capital research director Nick Einhorn told Yahoo Finance Live (video above) regarding Instacart and another recent IPO, Arm (ARM).

"They've all kind of traded down from their first open, and I think that goes to some of the skittishness in the market generally, obviously, with the Fed meeting this week and the potential government shutdown," Einhorn added.

Instacart's public debut was a long time coming.

It was the first venture-backed tech IPO since 2021. The IPO market is also still gradually regaining momentum after a long dry spell, and that has meant more price volatility for names gaining a lot of attention.

"It just shows that IPO investors are still not totally convinced that the IPO market is back," Einhorn said. "They're a little jittery. Maybe some of them are taking gains early once these companies priced up."

Prior to its debut, on a fully diluted basis, Instacart was priced for a market valuation of $10 billion, nearly 70% less than its private valuation of $39 billion in 2021 at the height of the pandemic, per Pitchbook data.

And that nearly $40 billion dollar valuation won't happen again, at least in the near future.

"There's a recognition that those kinds of valuations are off the table for now," Einhorn said. "They're not coming back anytime soon."

On the other hand, the hype is there.

"The fact that they got healthy receptions — they priced at the high end of the range for Arm, raised the range for Instacart and Klaviyo — that does show that there is demand for IPOs out there," Einhorn said. "It's just a question of maybe follow-through with the aftermarket trading. They're not just looking for kind of any hot thing at the moment."

It's no longer the IPO market of 2021; investors are much more critical now.

Roth MKM managing director Rohit Kulkarni told Yahoo Finance that given the slowdown in the IPO market, there's a new standard for these companies to go public.

"[The] new wave of IPOs [is] probably going to be more name brand, battle-tested companies," Kulkarni said. "So the quality of preparedness is going to be much higher."

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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