News > Capital Markets

Here's a Story About a Struggling IPO that isn't Snap

By NexChange
Capital Markets

Plenty of ink has been spilled now about the struggles Snap Inc. has faced since its blockbuster $25-billion public offering, with the company sinking to just above its IPO price a couple of weeks ago.

But now there’s another high-profile young company also feeling the Wall Street growing pains: Blue Apron, the New York-based meal ingredient delivery service company, which opened for trading on Thursday at $10-per share, fell below its IPO price on Friday, as CNBC reports. Blue Apron’s early struggles – TechCrunch notes that its share price opened significantly below the $15-$17 it had projected – is a clear sign that investors are perhaps just as worried about the company’s growth prospects as they are about Snap’s.

Per CNBC:

“I think the trading level reflects the understanding that this is not a business where growth will come easily and quickly. That is not to say that Blue Apron’s business model is poor, just that it faces a whole host of challenges that need to be factored into the stock price,” said Neil Saunders of GlobalData.

“I daresay that Blue Apron hoped to benefit from Wall Street’s traditional over-optimism when it comes to online and digital companies. However, I think investors are awake and smelling the coffee on this one.”

Meanwhile TechCrunch digs deeper into the mixed bag that Blue Apron brings to the table with its financials. On one hand, the five-year old company has shown substantial revenue growth, bringing in $795.4 million in sales last year, which was way up from the $340.8 million in brought in the year before.

But, like most venture-backed companies at the time of their IPO, there are also losses. Last year the company lost $54.9 million and the number was $47 million for 2015.

What investors are most concerned about is the growing marketing spend as a proportion of their revenue, suggesting that there’s high customer turnover. Blue Apron nearly tripled their marketing budget to $144.1 million last year, up from $51.4 million the year before. In other words, they are spending more for each dollar earned.

Despite Blue Apron’s slow start out of the gate, things could be worse: Analyst Ken Cassar tells CNBC that he “expects at least half of meal-kit companies to die off following Blue Apron’s market debut on Thursday, and the acquisition of Whole Foods by Amazon.”

Photo: Blue Apron

Subscribe to our Newsletter

Be one of the first to experience the future of financial services