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Blue Apron IPO Flounders

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“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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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.