Our New Website Is Here!
As part of our merger with St. Paul Research, we’ve created a new website that will house all of our collective content under one roof, bringing you a higher level of research and service through our analysts’ combined insight, expertise, and perspective. Go to my.stpaulresearch.com to access our new site.

This is How You Spot a Terrible IPO

Here we go again…

Market hucksters are trying to force-feed us another useless stock. This time it’s Blue Apron Holdings (NYSE:APRN).

Earlier this month, we told you how Blue Apron had planned its market debut before the start of the third quarter. The company is one of a few prominent “meal in a box” subscription services that sends subscribers ingredients and recipes for healthy food they can cook from scratch.

Just a few weeks ago, the company planned to debut on the New York Stock Exchange at a hefty $3 billion valuation, or $15 to $17 per share.

That’s when Amazon threw a Molotov cocktail through Blue Apron’s kitchen window…

Amazon’s $14 billion bid to buy Whole Foods was a wakeup call to the entire grocery industry. One of the most innovative companies in the world instantly became a potential Blue Apron competitor. What’s to stop Amazon from starting a copycat meal in a box program on the cheap? Nothing.

So we weren’t surprised to hear that Blue Apron management had to drop the price after they went fishing for institutional investors. After the Amazon – Whole Foods deal, they didn’t get many bites.

Due to soft demand, Blue Apron cuts its IPO range to $10 – $11. The stock debuted Thursday morning, opening at $10 on the nose. Just a couple of weeks ago, I remarked that the $3 billion valuation was pricey for a company that sends overpriced food and recipes through the mail.  To be honest, I still can’t wrap my head around why anyone would want to buy shares of this company right now.

But some buyers did show up when the stock began trading yesterday, bidding shares all the way up toward $11 before backing off in the afternoon. The stock settled back down to its opening price by the afternoon bell.

It’s easy to look at the morning buying APRN attracted yesterday and declare its foray into the public markets as a success. But we’ve seen this story play out before…

We haven’t forgotten the torrid debut of social media also-ran Snap Inc. (NYSE:SNAP) back in March. Shares sprinted right out of the gate, trading nearly 50% above the initial pricing even as an analyst slapped the stock with a downgrade as soon as it began trading.

A dismal price target of $10 per share didn’t deter a single speculator. During its first two days as a public company, SNAP saw its shares jump from an opening price of $24 to a high above $29.

But the party didn’t last.

After opening higher on its third trading day, sellers showed up. SNAP stock started to crack. It’s never once approached these highs since. Even after a small comeback move posted this week, SNAP stock is stuck well below $20.

It was Snap’s dismal first earnings report that helped bring the stock back down to earth. But the company never stood a chance. That’s right – SNAP has its own Amazon to contend with. I’m talking about social media juggernaut Facebook…

Zuckerberg offered Snap CEO Evan Spiegel $3 billion to buy out his company way back in 2013. Spiegel refused. Ever since, Facebook has imitated Snapchat features across its platforms.

Right now, Facebook could squash Snapchat at any moment. The same feels true with Amazon and Blue Apron.

Congrats to Blue Apron management on their cash-grab IPO. But unless you’re looking to flush your hard-earned money down the toilet, ignore this lame stock.


Greg Guenthner
for The Daily Reckoning

You May Also Be Interested In:

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner