American Consequences - August 2017

Luke had already Uber’ed to work, sat through his morning meeting, and fielded calls, e-mails, and instant messages to get ready for the open. His firm didn’t put in for an allocation on the Blue Apron deal, despite having a great relationship with Goldman Sachs. The plan was to sit this one out and watch from the sidelines. But that plan changed... A day before Blue Apron kicked off its roadshow, Amazon (AMZN) announced the purchase of Whole Foods Market (WFM) which altered the entire scope of home- delivery food service. The competition for meal-kit delivery had already been heating up... Companies like Plated, HelloFresh, and Sun Basket all offer similar business models to Blue Apron. But the Amazon news was a gamechanger... and added the risk of cheaper prices and faster delivery.

He’d never received such a large allocation before, especially for a highly anticipated deal. But as the seconds turned to minutes, he began to worry. He started to speculate on why and how he received 1,000 shares. There must be a problem... He always put in for IPOs and typically got shut out. He received a few hundred shares here and there, but usually only for lukewarm deals. And when he flipped out of them, he was ecstatic if he made $1 on the trade. He poured himself a second cup of coffee and wondered what he should do on the open with his 1,000 shares. Should he immediately sell? Should he buy more? Or should he hold? Forty miles away in Midtown Manhattan, the head trader for a $500 million hedge fund was finishing up his bacon, egg, and cheese sandwich on the desk.

One of the worst things an investor can hear about a stock he owns is that Amazon is getting into the space. When you hear that, it's usually time to run – run as fast as you can.

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