Fintech giant SoFi (NASDAQ:SOFI) is underwriting the initial public offering (IPO) of grocery delivery app Instacart, marking its first big IPO deal. The Instacart IPO is considered one of the most high-profile U.S. listings this year. As per the Financial Times, the company intends to offer Instacart shares to users of its retail investment app.
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SOFI Grabs Big IPO Deal
SoFi is working on the Instacart IPO, as revealed by the Securities and Exchange Commission (SEC) filings related to the offering. Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) are the lead underwriters for the Instacart IPO.
SoFi had initially announced its intention to enter the IPO business in March 2021, with CEO Anthony Noto saying that the company would “be an underwriter in several IPOs over the coming weeks and months.” It is worth noting that Noto has extensive experience in IPOs, including that of Twitter, due to his former role as partner and head of the technology media and telecom group at Goldman Sachs.
As per an analysis by Financial Times, SoFi served as an underwriter on only five deals since March 2021, all of which were special purpose acquisition companies or SPACs. It also offered retail investors a small piece of the shares in a few IPOs, including Rivian (NASDAQ:RIVN), Nubank (NYSE:NU), and Oddity Tech (NASDAQ:ODD), without being named as an underwriter.
While the Instacart IPO marks a milestone for SoFi, the delay in reaching such a big deal indicates the challenges involved in improving retail access to IPOs. The ability to grab IPO shares at the offer price can generate huge profits. Aside from SoFi, Robinhood (NASDAQ:HOOD), traditional brokerages, and individual companies have also raised the issue of democratizing access to IPO shares.
Coming to Wall Street’s sentiment, analysts are currently sidelined on SoFi stock with a Hold consensus rating based on seven Buys, seven Holds, and four Sells. The average price target of $9.85 implies 12% upside potential.
Buzzing IPO Activity in September
IPO activity is picking up after a slump over the past one and a half years. In addition to Instacart, Softbank (SFTBY)-backed chip designer firm Arm Holdings and marketing-automation company Klaviyo are aiming to collectively raise billions of dollars via stock offerings in September.
Other companies that have postponed or canceled their IPO plans due to macro pressures and high-interest rates are expected to make a decision about their public listing based on the market’s reaction to these three key IPOs in September.
Interestingly, Instacart disclosed last week that PepsiCo (NASDAQ:PEP) has agreed to buy $175 million of Series A redeemable convertible preferred stock in a private placement to its IPO. Instacart also said that two firms, along with Norges Bank Investment Management and entities affiliated with TCV and Valiant Capital Management, have indicated an interest in purchasing up to $400 million of shares in the IPO at the offer price.
Overall, the reaction of investors to the IPOs in September will determine if more companies will go ahead with a public listing or if the lull in deal activity will continue in the months ahead.
