“After 2 months of Blue Apron @ $10/serving, customers can always return to the Trader Joe’s freezer case, and a nice social experience, @ $2.79 per serving,” writes a commenter at WSJ re: food delivery IPO from Blue Apron which looks to be having trouble attracting investors.
The company had hoped for shares to sell for between $15 and $17. Instead they are priced for $10. The Wall Street Journal reports that investors may have been worried about profitability, a welcome change from recent history.
The outcome is far from what Blue Apron anticipated when the company launched its cross-country pitch to investors. Blue Apron sought to sell shares between $15 and $17 apiece, which would have valued the company at $3 billion at the midpoint of the range. However, the startup struggled to find buyers at those prices. Investors who considered the IPO expressed concern about Blue Apron’s marketing costs and customer turnover, according to fund managers and analysts.
“It’s hard to see what the bull case is,” said Sean Stiefel, portfolio manager at Navy Capital LLC who didn’t invest in Blue Apron’s IPO. Mr. Stiefel’s firm participated in recent IPOs by Snap chat parent Snap Inc. and enterprise software companies Appian Inc. and OktaInc.
Earlier Wednesday, Blue Apron lowered its expected price range to $10 to $11 a share in a regulatory filing. Such a cut is fairly uncommon: Since the start of 2012, 10% of U.S.-listed IPOs have lowered their ranges, by 34% on average, according to data provider Dealogic.
Blue Apron raised $300 million by selling 30 million shares at $10 apiece, less than the $480 million the company and its underwriters had expected at the midpoint of its earlier target price range.
Some investors looking at the IPO said they were worried about Blue Apron’s profitability. The company’s revenue has been increasing, but it has posted net losses each year since its inception in 2012, and those losses have been rising. Marketing costs as a percentage of revenue have also climbed in recent years. In the first quarter, marketing costs rose to 25% of revenue, up from 15% a year earlier.
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