Instacart raises IPO price range after success of Arm listing

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Instacart has raised the price range for its initial public offering following the success of Arm’s blockbuster debut this week, in the latest sign of a warming market for new US listings.

The online grocery delivery company boosted its price range by about 7 per cent to $28 to $30 per share in a filing on Friday, valuing the group at up to $10bn on a fully diluted basis.

The upward revision by San Francisco-based Instacart comes a day after UK chip designer Arm rose 25 per cent on its first day of trading on the Nasdaq exchange.

Previously, Instacart had sought between $26 and $28 per share, equivalent to about a $9.3bn value for the company. At the top end, that would raise $660mn compared with an earlier target of up to $616mn.

However, even after raising the range, the company would still be worth about a quarter of the private valuation it enjoyed two years ago.

Arm’s IPO is the largest US listing in almost two years, raising almost $5bn for SoftBank, the Japanese conglomerate that bought the Cambridge-based semiconductor company for $32bn in 2016.

Arm’s closing price on Thursday gave it a market capitalisation of $65.2bn based on shares outstanding, or nearly $68bn on a fully diluted basis.

That tops the $64bn valuation at which SoftBank last month bought out the remaining stake in Arm that it did not yet own from the Vision Fund, the $100bn Saudi-backed vehicle that is managed by SoftBank itself.

Investor demand for shares in Arm has fuelled optimism of a resurgence in the US IPO market after a dearth of such deals this year. Alongside Instacart, marketing software group Klaviyo and sandal maker Birkenstock are also expected to test investor appetite for their shares in the coming weeks.

Arm’s listing was helped by its large size and previous history as a public company. Instacart and Klaviyo, in contrast, will be seen as a litmus test for how public markets will receive the sort of venture capital-backed tech companies that dominated IPO markets until recently. Tech start-ups have faced a significant slowdown in financing and plunge in valuations over the past year.

Instacart is planning to sell a portion of its shares to retail investors, with investment platform SoFi acting as an underwriter on its first-ever mainstream IPO.

Several bankers working on the Arm deal said they had been cautious in setting pricing terms to ensure the deal went well given its importance to the broader IPO market. One person close to Instacart said it had been similarly prudent with its initial price range, but said they were encouraged by Arm’s reception.