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Blue Apron Holds in NYSE Debut After Chopping 1/3 Off Valuation, BVP Makes 15x Return

June 29, 2017

While not the first food ecommerce company to list on a US exchange — weight loss meal plan company NutriSystem went public in 2000 — Blue Apron is certainly the largest. It’s also the first meal kit company to IPO, with global competitors HelloFresh and SunBasket watching the outcome closely ahead of launching their own expected IPOs.

Blue Apron debuted on the New York Stock Exchange today trading as high as $10.46, up from its IPO price of $10, at some points during the morning session. The company initially aimed to price the deal in a range of $15 – $17 a share, which could have valued it as high as $3 billion. But it slashed the IPO price to $10 a share last night, giving it a valuation of $1.9 billion, just below the $2 billion valuation it reached at its last private funding round.

For some Blue Apron investors, the IPO spelled a big payout; PitchBook reports that Bessemer Venture Partners, which held a 22.8% stake “could be looking at an estimated 15.4x return on its investment.”

Some reports indicated that the IPO market was tough for issuers. “The deflated pricing signals a new sense of caution that has pervaded the market for initial offerings. The big institutions that buy shares in market debutantes have pushed back against ambitious price and valuation targets in recent months, leading to fewer first-day stock-price pops — but also fewer subsequent drops,” reads the New York Times.

But other commentators pointed to some questionable metrics regarding Blue Apron’s unit economics and ability to retain customers as a cause for concern for investors. Fortune‘s Erin Griffith said in today’s Term Sheet:

“Daniel McCarthy, a professor and entrepreneur, has crunched some numbers using a retention curve technique he developed to arrive at this figure: 62% of Blue Apron customers churn within six months. Combine that with another stat that Blue Apron did disclose: It pays an average of $94 to acquire a customer. So: Blue Apron ended the first quarter with one million subscribers. That means, to merely stay flat, by my calculations, Blue Apron must pay $58 million every six months to just replace the customers that leave. To grow, it’s gotta spend even more.”

For takeout delivery company Delivery Hero, it’s a slightly different story, with the German company expected to price its IPO at the upper end of a €22.00 to €25.50 range, according to ReutersThe company is set to debut on the Frankfurt Stock Exchange with a valuation of over €4 billion. Delivering meals for third party restaurants is a different model than procuring and delivering fresh food, but analysts believes there’s a similar danger that there will only be room for one or two major players in each market.

According to Reuters, Delivery Hero says it is the market leader in 35 of the more than 40 countries it operates in Europe, the Middle East, North Africa, Latin America, and Asia Pacific, and that the total market it has access to is worth €72 billion. But competitor is putting up a fight for leadership in Germany, according to its founder, and there will no doubt be other local leaders doing the same in other locations.

But Amazon’s announced acquisition of Whole Foods has put Blue Apron and other grocery delivery startups under much more pressure; Amazon could create “an enormous and incredibly savvy rival almost overnight” reads NYTReuters reported that “investors expressed concerns about the $13.7 billion Amazon deal as well as Blue Apron’s marketing costs and lack of profitability.”

Even without that pressure from a huge player, several food delivery startups have struggled with the model and closed down such as Sprig and Maple.

But Blue Apron is confident in its mission to “build a better food system” and “transform the way that food is produced, distributed and consumed.” Blue Apron was founded in 2012 by Matthew Salzberg, Matt Wadiak and Ilia Papas.

More on Blue Apron:

Blue Apron: Why IPO and What Does it Mean for Meal Kit Competitors?


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