The Information reports that "Instacart, the instant delivery company gearing up to go public, has slashed its internal valuation to about $13 billion, according to two people familiar with the matter. It’s the third time the San Francisco startup has reduced its internal valuation this year, in a period when public delivery stocks have continued to shed value.
"The new price represents a two-thirds drop from the $39 billion valuation Instacart was given by Andreessen Horowitz, Sequoia Capital and other private market investors in 2021. The lower internal price cuts the price of new stock-based compensation issued to employees and could also help Instacart reset investor expectations ahead of its public listing, in which it plans to sell mostly employee shares."
The story notes that "lowering a company’s 409a valuation can give the company an edge in recruiting and retaining employees. When the 409a valuation drops, new employees given restricted stock grants—the form of stock-based compensation Instacart has been offering—are awarded more shares for every dollar issued of a stock grant. For existing employees, the value of the stock grants declines. But sometimes the company will offer more stock units, or 'refresher grants,' in order to make up for the drop in value."
- KC's View:
This is just makes the point that Instacart is going to do its IPO sooner rather than later - it is getting its ducks in a row and making sure that its valuations cannot be challenged in a way that would be deadly to its future.