Blue Apron Gets a Buyout Premium, But First It Had to Lose 99%

Blue Apron Holdings Inc.’s buyout offer is more than double its market value. So why does it feel like a fire sale?

(Bloomberg) — Blue Apron Holdings Inc.’s buyout offer is more than double its market value. So why does it feel like a fire sale?  

Wonder Group, a startup backed by entrepreneur Marc Lore, offered $13 per share for Blue Apron, a 137% premium to its closing price prior to Friday’s announcement. That valued the meal-kit delivery company at approximately $103 million, a far cry from its nearly $2 billion market value when it went public six years ago as one of the most prominent IPO unicorns of the era.

The Wonder Group deal is expected to close by year-end, capping Blue Apron’s tumultuous ride as a public company. Since its underwhelming debut on June 28, 2017, just days after Inc. rattled the food industry by agreeing to buy Whole Foods Market Inc., the company’s shares have fallen around 99% on a split-adjusted basis. Blue Apron struggled to turn a profit with its business model of delivering ingredients to busy customers so they can prepare their own meals at home. It also faced intense competition from HelloFresh SE that has been eating up market share.

Earlier this year, in a bid to keep the lights on, Blue Apron transfered its operational infrastructure including fulfillment centers to FreshRealm Inc. It executed a 1-for-12 reverse stock split in June, three years after doing a 1-for-15 split to bolster its share price. It also attempted to switch its New York Stock Exchange listing to Nasdaq.

Blue Apron’s steep declines in the months after its IPO made it poster child for companies whose rich private valuations failed to withstand the scrutiny of public markets. Even as IPO activity in the US starts to pick up today, the performance a stark reminder of the challenges facing issuers and investors. Among the trio of highly anticipated issuances from Arm Holdings Plc, Instacart and Klaviyo Inc., Instacart has fallen below its offering price, and Arm, while still trading above its IPO price, is more than 10% below the closing level on its first day of trading. 

Read more: IPO Rebound in the US Fuels 2024 Optimism From Paris to Tokyo

With the acquisition of Blue Apron, Wonder says it plans to create a leading platform for mealtime, enhancing choice, flexibility and convenience through two brands. Still, some Wall Street analysts don’t see it having much effect on the industry landscape. 

“We don’t expect US competitive intensity to increase post-completion of this deal given Blue Apron’s limited size vs HelloFresh,” Jefferies analysts including Sebastian Patulea wrote in a research report. Patulea estimated HelloFresh is about 11 times larger than Blue Apron in the US.

The stock soared 135% Friday on the merger announcement, the most in more than three years when Blue Apron rallied on demand for at-home dining during the pandemic. That boom fizzled as Covid faded and customers returned to their regular lifestyles. 

In addition, Friday’s triple-digit rally was in part fueled by a short squeeze. About 15% Blue Apron’s shares were sold short before the deal was announced, according to data from financial analytical firm S3 Partners, forcing short sellers to close their bearish bets.  

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