Last week, the NYSE saw Blue Apron ($APRN) shed more than half of its pre-IPO intended value. Its share price was to be set around the $15-$17 price range, but demand didn’t meet the price, forcing Blue Apron to IPO at $10 a share. Since IPO, the value of the share fell to around $8.18 (as of 7/10), and
Blue Apron is starting to feel the pressure of an unmet valuation due to inflated revenue multiples by private investors. In the summer of 2015, Blue Apron reached a private valuation of around $2 billion. Two years later, today, the consumer grocery subscription company is valued at around $1.5 billion.
How did Blue Apron get to this point? More precisely, why has Blue Apron shed so much value in such little time? I think that the culprit lies mainly in Blue Apron’s roster of private investors (BoxGroup, Graph Ventures, etc.)
Blue Apron has found itself on tech news outlets more often than any other non-tech company in recent history because primarily tech investors have added the consumer perishable logistics company to their portfolios. BoxGroup, with its portfolio of familiar names like Oscar, Flexport, and Stripe and Graph Ventures with Lever and Niche added Blue Apron, which resembles a combination of grocery and logistics company more than a technology-focused company. Though Blue Apron has proved to own a significant portion of the delivered grocery market, climbing to three-quarters of a billion in sales in 2016, it’s been treated with revenue multiples that resemble more of a technology company rather than the grocery and logistics company that it truly is.
The intended IPO price of $15-$17 per share implies a revenue multiple of around 6x for Blue Apron. To put that into perspective, even LinkedIn with its larger IPO reached a revenue multiple of 5x in its 17th week.
What Blue Apron’s seen on the public market is no more than a correction: Even though all of Blue Apron’s subscriptions are initiated online, investors on the public market realize that the company is not a full-fledged tech company that deserves higher revenue multiples.