Blue Apron's Stock Fizzles in Debut After Disappointing IPO

  • Shares close at offer price of $10 after range was lowered
  • Meal-kit delivery service faces declining per-customer revenue

Why Blue Apron's Stock Fizzled in Debut

It’s not the entree into being a public company that Blue Apron Holdings Inc. was hoping for.

The meal-kit delivery company’s stock closed at its $10 initial public offering price, which had already been cut by more than a third to help stoke demand for the shares. U.S.-listed IPOs bigger than $100 million that started trading this year averaged a 13 percent jump in share price on the first day of trading, according to data compiled by Bloomberg.

Blue Apron’s first day of trading marks the end of a 10-day deal pitch that saw the New York-based company’s target market value chopped to Thursday’s $2 billion from $3.2 billion.

The company’s listing has been overshadowed by Amazon.com Inc.’s agreement to buy Whole Foods Market Inc. for $13.7 billion just three days before Blue Apron launched its IPO. The takeover sent grocery stocks tumbling, and Blue Apron’s management tweaked its deal pitch to distinguish it from a grocery delivery service, a person familiar with the matter said last week.

Blue Apron sold 30 million shares at $10 apiece, with the stock trading as low as $9.95 in late trading in New York. The company initially marketed shares for $15 to $17 before decreasing the range by a third to $10 to $11. Companies lower the price range when there isn’t enough investor interest in buying stock at the higher valuation.

Blue Apron’s cut was the second-biggest decrease in a marketed price range for U.S.-listed IPOs in the past five years, according to data compiled by Bloomberg.

The company had initially sought to raise $510 million, which would have given it a market value of as much as $3.2 billion. Having raised less money, Blue Apron said in a filing that it no longer intends to pay down debt with the proceeds. Instead, the funds will all go toward working capital, capital expenditures and general corporate purposes.

Soba, Chicken

Blue Apron sends boxes of pre-portioned ingredients and instructions for customers to cook meals at home. The $59.94 box, with recipes such as sesame soba noodles and soy-marinated chicken thighs, includes ingredients for three meals for two people. About 1 million customers use the product, according to the IPO prospectus.

The Amazon deal is especially pertinent to Blue Apron because its meal kits with fresh, high-end ingredients appeal to a similar customer base as Whole Foods: The top 10 percent of households by income, according to Kurt Jetta, chief executive officer of retail and consumer analytics provider Tabs Analytics.

Blue Apron has said it reaches only 0.7 percent of its addressable market of U.S. households. Those customers have been ordering fewer, cheaper meal kits. 

At the end of the first quarter, Blue Apron had 1 million customers who made 4.1 orders each -- compared with 649,000 customers making 4.5 orders apiece a year earlier. The average order value fell to $57.23 from $59.28 in the same period, while average revenue per customer slipped to $236 from $265.

The company has warned that it may never turn a profit. Its net loss widened to $54.9 million in 2016 from $47 million a year earlier, despite net revenue climbing to $795 million from $340.8 million in the same period, the prospectus shows.

Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and Barclays Plc led the IPO. The company trades on the New York Stock Exchange under the symbol APRN.

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