Instacart loses almost all its IPO gains by second day of trading as rally fizzles

Instacart shares slumped more than 5% in their second day of trading Wednesday, continuing a slide that began immediately after the stock hit the Nasdaq on Tuesday, and leaving it narrowly above its IPO price.

On Monday, Instacart sold shares in its long-awaited IPO at $30 a piece. Trading under ticker symbol “CART,” the stock popped 40% to open at $42, but then sold off throughout the day to close at $33.70. By Wednesday afternoon, Instacart’s rally had fizzled further, and shares are now trading below $32.

Instacart’s offering helped reignite a sleepy IPO market, which has been mostly closed since late 2021 as companies were plagued by inflationary pressures and rising interest rates. But Instacart’s falling share price suggests investors are still hesitant to buy into tech companies that are aiming to disrupt traditional markets despite challenging economics.

The grocery delivery company joins a group of gig economy companies on the public market, following the debut in 2020 of Airbnb and DoorDash and ridehailing companies Uber and Lyft in 2019. Of those companies, only Airbnb has been a good bet for investors.

Gene Munster, managing partner at Deepwater Asset Management, expressed some skepticism about Instacart in an interview with CNBC’s “Closing Bell” Tuesday. Munster said the initial pop was “misleading” and typical of an IPO. He said investors should note that Instacart’s unit growth has been flat year to date.

“The question investors should ask today: Do you believe order growth will reaccelerate? My view on that is I think that it will improve from flat, but it’s not going to be as exciting as Uber,” Munster said, adding that his firm owns Uber shares but not Instacart.

Analysts at Needham issued a “hold” rating on Instacart’s stock in a Tuesday note. They said they anticipate the company’s growth will be “more difficult” over the next three years.

“Our expectations for post-pandemic online grocery sales in the US are likely going to be below consensus, and we see structural headwinds against adoption,” the analysts wrote.

Following Instacart’s debut, marketing automation company Klaviyo hit the market on Wednesday. The stock initially rose 23% to $36.75 but has lost some of those gains.

WATCH: Deepwater’s Gene Munster is betting on Uber over Instacart