Trouble brewing for Blue Apron ahead of IPO?

New York-based meal kit delivery service Blue Apron. Blue Apron  Handout via RE
New York-based meal kit delivery service Blue Apron. Blue Apron Handout via RE
Author

30 June, 2017

To the cheers of hundreds of employees, Blue Apron executives rang the opening bell at the New York Stock Exchange on Thursday, marking the trading debut of the meal-kit delivery company. The company sold 30 million shares to raise $300 million.

At the $10.50 midpoint of the new range, Blue Apron would be worth about $2 billion - in line with the valuation it fetched the last time it raised money from private investors.

The flat performance came after Blue Apron slashed the price of its initial public offering - a rare move for a consumer tech company.

Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and Barclays Plc led the IPO.

While the Amazon-Whole Foods merger didn't help Blue Apron's prospects, the company's recent quarterly report "didn't look to good" amid high marketing spend.

Blue Apron sends boxes of pre-portioned ingredients and instructions for customers to cook meals at home.

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While Blue Apron has seen tremendous growth in the past five years (revenues jumped from $77.8 million in 2014 to more than $795 million in 2016), the company still registered a loss of about $54.9 million in 2016, seemingly satisfied to keep spending to fuel its expansion. The IPO is scheduled to reach a final price tonight and begin trading on the New York Stock Exchange Thursday under the ticker APRN.

According to the company's IPO filing, 90 percent of the meal-kit delivery service's customers abandon the service within a year of their first purchase. More importantly, they want to know how much that slice will cost them. That placed the company's overall valuation at about $1.9 billion, which is less than the more-than $3 billion implied by that prior estimate.

However, behind-the-scenes, other issues may have hampered Blue Apron's public offering. Instead, the funds will all go toward working capital, capital expenditures and general corporate purposes.

The company upped its marketing spend past year to $144 million, drawfing its 2015 spend, which was $51 million.

To stand out, Blue Apron has had to resort to generous offers for customers, including 50% off, $40 off, and 4 free meals.


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