Instacart rose 7.9% after reports that a deal could come as soon as this week. DoorDash fell 6.1%, losing about $4.7 billion of market value, against roughly $1 billion added to Instacart's.
The market's first vote on a possible DoorDash takeover of Instacart came down harder on the buyer than it rewarded the target.
DoorDash is in advanced talks to acquire Instacart's parent, Maplebear, in a deal that could value it at about $17 billion, according to reports on Monday afternoon from the Wall Street Journal, Reuters and Bloomberg, each citing people familiar with the matter. The Journal and Bloomberg said a deal could come as soon as this week. A source told Reuters it could be finalized as soon as Wednesday and that Instacart's talks with Uber are no longer active. Neither company has confirmed the talks.
Instacart shares closed up 7.87% at $60.88. DoorDash fell 6.10% to $168.44.
The arithmetic of the reaction
The dollar amounts tell the story. DoorDash's decline erased about $4.7 billion of its market value. Instacart's gain added about $1 billion to its own. The acquirer's shareholders lost more than four times what the target's shareholders gained.
Part of that is timing. DoorDash was already down about 3.1% at 3 p.m. Eastern, before the first report, for reasons that are not clear. It fell another 3.1% after. Instacart, by contrast, was trading down about 4.6% until the report, then jumped about 13% into the close.
At about $17 billion, the reported value is roughly 23% of DoorDash's market value of about $73 billion. Whether the figure refers to equity value or enterprise value has not been reported, and the structure (cash, stock or both) is unknown.
If $17 billion were all equity, it would work out to about $71.60 a Maplebear share, based on shares outstanding, roughly 18% above Monday's close. That gap is one measure of how much risk the market still sees in a deal being reached at that price.
A separate decision at Instacart
After the close, Instacart disclosed in a filing that its board decided on Oct. 25 to wind down Caper Cart, its smart shopping-cart business, to "re-align resources to support the Company's strategic priorities." It expects pre-tax charges of $55 million to $80 million, mostly in the fourth quarter. The filing gives no link to the sale process.
The context
The story moved quickly. On Oct. 23, Instacart was reported to be exploring a sale, with preliminary talks including both Uber and DoorDash. Instacart rose about 9% that day and DoorDash fell about 3.5%. Instacart has gained about 18% since its Oct. 22 close, before the sale talk became public.
Peers were calm on Monday: Uber fell 0.85%, Amazon rose 0.44% and Walmart 0.33%.
Two readings
One reading is that DoorDash would be buying a major grocery-delivery marketplace and its retailer relationships, strengthening its hand against Amazon and Walmart. If the $17 billion were all equity, the price would be roughly 39% above where Instacart traded before the sale talk began, a full takeover premium but one the buyer may judge worth paying for the category.
The other is that DoorDash's own investors are skeptical. Paying close to a quarter of its own value, with no clarity on financing or on how antitrust regulators would view a combined delivery platform, is a large bet, and on Monday the buyer's shareholders lost more in dollar terms than the target's gained.
What to watch
Any announcement or denial, the price per share and form of payment, the termination fee and regulatory conditions, and DoorDash's first trading session after any deal.