11 Aug 2017 - 23:54
Snap, Blue Apron fall flat as incumbents smash the upstarts
By Alex Barinka / Bloomberg
Snap Inc. and Blue Apron Holdings Inc. are learning it’s hard to make the case to public markets that you’re the scrappy, young disrupter of large incumbents when your own user growth is slowing.
The two companies reported disappointing earnings Thursday, sending their newly public shares plummeting. Both initially lured investors with niche products and rapid user growth, but the narratives have been dashed by behemoth competition -- Facebook Inc. in the case of Snap and Amazon.com Inc. for Blue Apron.
It’s a turnabout for two of the most prominent technology initial public offerings of 2017, and a cautionary tale for private companies considering their own share sales. So deep is the loss of trust that analysts at firms that led the IPOs have downgraded both stocks, saying they were wrong about their initial advice to clients.
Seeking Bigger Audience
Snap reported a fourth consecutive quarter of slowing growth in the number of daily users for its app compared with a year earlier. The company had asserted that the app would gain popularity as it updated with new features, but product updates like a map to find friends so far haven’t accelerated user growth. The stock fell as much as 14 percent to $11.81 Friday in New York, it’s lowest price yet since its March IPO.
Snap has touted its disappearing photo app as being all about using the camera for communication -- a narrower aim than some of its social media peers. But social network giant Facebook and its Instagram photo app have copied Snap’s key features to lure away users and the advertising dollars that follow them.
Blue Apron says it’s selling a lifestyle around its weekly meal-kit boxes. It was an assertion meant to differentiate it from e-commerce conquistador Amazon, which has filed for a patent of its own delivery kits and recently agreed to purchase upscale grocer Whole Foods Market Inc.
Blue Apron had doled out cash on marketing to lure customers leading up to the IPO. In the last quarter, it slashed that spending almost in half compared with the three months prior and its customer count slid by 9 percent. Investors balked at the numbers, sending the stock down 18 percent. On Friday, the stock slipped a further 1.8 percent to $5.05 at 12:00 p.m. in New York.
Blue Apron priced its stock at $10 a share on June 28. For the first six weeks of trading, the company’s stock performance is the worst of all U.S. IPOs with offering sizes greater than $300 million this decade, according to data compiled by Bloomberg.