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Blue Apron's Lower IPO Pricing Is A Positive

30 June 2017

The meal-delivery startup lowered the price of its initial public offering to about $10 per share on Wednesday afternoon, a sharp drop from the $15 to $17 range the company had disclosed last week.

The latter's $13.7 billion deal to buy Whole Foods Market Inc has weighed on prospects for the meal-kit industry and the IPO price cut was ssen as a possible sign of the difficulty Blue Apron is having attracting investors.

Blue Apron (APRN) is serving up a dish that big-money investors have turned away, causing the company to lower the price of its initial public offering by about 34%.

The underwriters for the offering are Goldman Sachs, Morgan Stanley, Citigroup, Barclays, RBC Capital Markets, SunTrust Robinson Humphrey, Stifel, Canaccord Genuity, Needham, Oppenheimer, Raymond James and William Blair.

However, Amazon.com's $13.7 billion deal to buy Whole Foods Market Inc has left potential investors anxious about the prospects of the meal-kit industry.

Blue Apron, which began life as Petridish Media in 2011, is in the business of mailing a box with "pre-positioned" ingredients and a recipe, in order to streamline the task of making food at home.

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The company had initially sought to raise $510 million, which would have given it a market value of as much as $3.2 billion. Why doesn't Blue Apron extends its widely utilized new-customer discount model to new investors?

Blue Apron Holdings was founded in 2012 and booked $868 million in sales for the 12 months ended March 31, 2017. About 1 million customers use the product, according to the prospectus.

"This clearly highlights that new investors are wary of the effect of Amazon's recent acquisition of Whole Foods on Blue Apron's ability to acquire and retain subscribers", said Rohit Kulkarni, managing director of private investment research at SharesPost, which focuses on growth companies.

Wall Street is sniffing cautiously at Blue Apron's stock. Instead, the funds will all go toward working capital, capital expenditures and general corporate purposes. Without solid customer retention, it may be hard for Blue Apron to keep up its growth.

The company has warned that it may never turn a profit. But the company lost about $55 million last year, up from $47 million a year earlier.

Blue Apron's Lower IPO Pricing Is A Positive