Meal-kit company Blue Apron Holdings Inc. saw its stock go public on Thursday and begin trading, but its shares didn’t show much sizzle due to worries about how the company would fare against Amazon after it closes its Whole Foods purchase.
James F. Peltz and Samantha Masanuga of the Los Angeles Times had the news:
The 5-year-old company, which sends customers a weekly box of recipes and accompanying ingredients, saw its shares rise 3.5% Thursday to $10.35 in the hours after its debut on the New York Stock Exchange.
But Blue Apron Holdings Inc. faces an increasingly competitive market: Besides other cook-it-yourself start-ups, there also are meal delivery kits that involve only microwaving and an explosion of restaurant delivery apps; huge companies such as Amazon.com also are eyeing the space.
In a troubling sign, Blue Apron slashed its IPO price Wednesday to $10 a share, significantly lower than its original estimate of $15 to $17 a share. Blue Apron raised $300 million with the offering, selling 30 million shares of Class A stock at the $10 price — well below the amount it had hoped to raise.
The sharply lower price indicated that investors have heightened concerns about how Blue Apron, which reported nearly $800 million in revenue last year but is unprofitable, will fare in the fast-changing market for food shopping.
“The competition for stomach share is fierce,” said Aaron Turner, an analyst at Wedbush Securities. “The onus on Blue Apron after they go public is to maintain their user growth, but to do so in a cost-efficient manner. And sometimes that can prove challenging.”
Roger Yu of USA Today reported that Amazon’s deal could force changes to Blue Apron’s business:
Blue Apron focuses on home-delivery of boxes with fresh ingredients and recipes that are used for home cooking. But the Amazon-Whole Foods union is expected to unleash massive changes that could affect a wide swath of food suppliers and other retailers. Whole Foods already sells ready-to-cook meal kits. Amazon is nearly peerless in delivery and pickup logistics and cutting prices.
Blue Apron’s SEC filing Wednesday contains the usual caveats for investors buying IPO shares, outlining some industry and company-specific challenges. In it, Blue Apron said consolidation in food delivery and related industries could dampen growth.
“Some of our current competitors have, and potential competitors may have, longer operating histories, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing and other resources and larger customer bases than we do,” the company said.
Meanwhile, a growing list of startups compete more directly with Blue Apron in meal-delivery services. They include Plated, Sun Basket, HelloFresh and Home Chef.
Even before the Amazon deal, changing consumer habits in shopping and eating have been weighing on investors’ assessment of food and retail businesses. S&P’s food & beverage industry index is down 2.3% in the last month. The retail sector has fallen about 8% in the last six months.
Anita Balakrishan and Sarah Whitten of CNBC.com reported that the stock underperformed other IPOs:
For instance: shares of the year’s most hyped IPO, Snap, popped 44 percent on the first trading day. But even less well-known companies saw big gains out of the gate.
To be sure, the first day of trading is no death sentence. Facebook went public on May 18, 2012, priced at $38 per share. It gained only 0.61 percent in its debut closing at $38.23. Snap, meanwhile, has seen shares fall more than 20 percent over the past three months.
“We’re cautious to read too much into Blue Apron’s trading activity today,” said Technomic’s Erik Thoresen. “This is an emerging market and growth is a long-term play. Blue Apron’s success will rely heavily on converting consumers to new ways of sourcing food at home.”
And comparing a food-delivery start-up to a software company isn’t exactly apples-to-apples. Blue Apron is the only meal-kit delivery start-up to go public so far. US Foods, a food distributor that went public last year, gained 8.3 percent in its first trading day.
“I think their public offering is a great mark of validation for the category overall, and aligns with the trends towards an e-commerce-driven world,” said Andy Levitt, CEO of Purple Carrot. “Customers in general are not going into malls; they’re buying goods online. The meal kit market — and the grocery space overall — is ripe for disruption and improvement. This IPO and what comes from it is going to be good for customers, and for investors as well.
