Elliot Lutzker, a former SEC attorney who works with companies preparing for public offerings and on SEC compliance matters at the law firm Davidoff Hutcher & Citron, said a viable deal doesn't mean a properly valued deal, or even close to it. That is important as the economic clock ticks closer to recession and the stock market softens — December has been the worst December for stocks since 1931 — and more richly valued start-ups aim to go public.
"When there is an unlimited amount of private money and [venture] funds can do A, B, C, D, E and F financing rounds, there is no reason to go public, and then when a lesser company than an Uber, say Blue Apron, can't do the next round, or has to do a down round, then they are forced to go public," Lutzker said.
The IPO, it would turn out, was a down round for Blue Apron.
"VCs who put in the money are forcing it and the banks ... it's their compensation. ... It is unfortunate that Amazon acquires Whole Foods during your roadshow, but underwriters want to get paid and VCs want to cash out," the IPO attorney said. "The fact that it had to cut its valuation by 34 percent shows it was overvalued."
A Blue Apron spokeswoman said the company is confident in its strategy to accelerate its path to achieving profitability on an adjusted EBITDA basis in both the first quarter of 2019 and for full year 2019.
"We are laser-focused on building a strong, sustainable, profitable business to drive value for all of our stakeholders, which we believe will be reflected in the results of the decisive actions currently underway. Our course has not changed. Creating value for our stakeholders is a top priority we are bullish on our future," the spokeswoman said, and she also pointed to a deal announced this week with WW (formerly Weight Watchers).
The company laid off 4 percent of its staff in November and after years of high marketing expenses said that it was shifting its strategic focus to the 30 percent of customers that generated the majority(80 percent) of its revenue.