The company priced its IPO at $10 a share.
Shares of Blue Apron Holdings, a meal-kit delivery company backed by Silicon Valley investors, rose 1% after they were initially offered to the public Thursday, reflecting the industry’s outlook that’s been clouded by technology and evolving consumer habits.
Blue Apron offered 30 million common stock shares in the Thursday IPO in the New York Stock Exchange, and initially set the opening price at $10 per share, settling for the low-end of the pricing range.
Shares spiked 98 cents after they began trading to $10.98 on late Thursday morning, but the gains were soon pared back. They were up 11 cents to $10.11 by early afternoon. The IPO raised about $300 million that the company plans to use for expansion.
A day earlier, Blue Apron had cut the pricing range it sought to $10 to $11 from $15 to $17 it estimated less than two weeks ago, a one-third cut in its valuation to about $2 billion.
The IPO comes less than a month after Amazon announced a blockbuster deal to buy Whole Foods Market for about $13.7 billion, triggering sell-offs in grocery stocks and speculation that grocery retailers will seek mergers to fend off competition.
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.
“By going public, Blue Apron will be under intense scrutiny as to how they intend to create a sustainable moat around their business,” wrote Eric Kim, managing partner at technology investment firm Goodwater Capital, in a report about Blue Apron. “How they plan to use these IPO proceeds to create that moat, other than spending on marketing, will be critical to how enamored Wall Street becomes with the stock.”
Founded in 2012, Blue Apron offers two delivery options, a two-person meal plan and a family plan, starting at $8.99 per serving. The small meal-kit box, containing fixings for three meals for two people, costs $59.94. Blue Apron sells wine that can be paired with the meals.
The company says its business model is based on eliminating middlemen and giving customers specialty ingredients, “many of which are not widely available and are exclusive to us.”
From Blue Apron’s start through March 31, the company has delivered more than 159 million meals to U.S households, representing roughly 25 million paid orders, the company said.
Its customer base has more than tripled since 2015, with more than 1 million customers ordering 8 million meals every month, noted Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners, in a report.
Its revenue has grown from $77.8 million in 2014 to $795.4 million last year.
But retaining customers remains a challenge. About 60% of new customers leave the service after six months, Dusaniwsky said.
Losses are also mounting as Blue Apron spends aggressively on marketing and promotion. The company’s net loss widened to $54.9 million last year from a $30.8 million net loss in 2014.
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