As Blue Apron Files for IPO We Ask is it a Good Buy?

Blue Apron, the pioneer of food kits industry is planning to go public. The 5-year old company recently filed for an IPO, led by Barclays, Goldman Sachs, Citigroup, and Morgan Stanley. The company filed for a public offering on Thursday, suggesting ‘APRN’ as their preferred symbol. If the company successfully holds an IPO, it would become the most promising consumer startup in the recent years to go public.

Blue Apron

What Motivates the Move?

 

Although Blue Apron was a pioneer in its industry, growing competition is getting the best of it. Purple Carrot, Sun Basket, and HelloFresh are rivals that are eating into the profits and market share of the company. Food kits supply has been one of the most promising businesses in the US. However, even with growing revenues and increasing sales, businesses are unable to manage their costs. The same happened with Blue Apron. The cost of operation is too high which when matches with marketing costs eats away all the growth in revenue.

If Blue Apron goes public, it could be following the footsteps of Snap Inc, Snapchat’s parent company that was listed in NYSE in March.

What’s the Offer?

 

The details of the company’s filing are not revealed yet and the size of the offering is not determined. However, a $100 million fund-raising target could be in sight as it is used in most preliminary offerings to determine the fees of filing. There is no doubt that the company has witnessed exponential growth since its conception.

Blue Apron provides meal kits to its customers. These meal kits contain some ingredients and a recipe which can be used for cooking pre-assembled meals at home. The company experienced a 10-fold growth between 2014 and 2016. Note that the company’s marketing budget also grew 10 -fold during this period, amounting to $144.1 million. However, losses have been worrying the company for some time now.

While the company enjoyed $795.4 million in sales in 2016, the losses grew to $54.8 million, a 16 percent rise from the previous year. The filing shows that the company’s adjusted earnings through Ebitda show a 32.5 percent increase in losses. The amount of loss in 2016 was $43.6 million considering depreciation, amortization, taxes, and interests.

Due to tough competition, the company had to spend more on marketing which led to bigger losses. Additionally, cost of their ingredients has also increased in recent times. As growth stalled in the first quarter of 2017, the company seeks bigger capital and more backup with an IPO.