American Consequences - August 2017



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. On the first day of the Blue Apron roadshow, Luke’s firm started to work on a short thesis for the IPO. They looked at revenue growth, profitability, and if Blue Apron had a real competitive advantage even with Amazon focusing more on food. Luke made calls around the Street to get a feel for how the book was shaping up. The insight he got reaffirmed the short thesis... He learned that Goldman Sachs was having a very difficult time building a book – which simply means getting their clients to put in an indication of interest on the deal. From that alone, Luke knew to stay away. As APRN got closer and closer to opening, Luke called up a trusted no-name broker in hopes of hiding the trade from Goldman Sachs and placed an order to short 200,000 shares. Meanwhile in Blue Apron’s Soho headquarters, emotions were mixed with fear and excitement, according to a source close to the company. There’s always optimism inside the walls of a company on the day they go public. “Lots of fingers were crossed that day,” my source said.

Originally, the IPO price range was $15- $17 a share. Then it was dramatically cut to $10-$11. This was cause for concern for some investors and employees because the company was valued at $2 billion in their last private round in 2015. The price reduction meant that it was below the old valuation and some might be underwater on their investment already. Regardless, Blue Apron moved forward with their IPO – offering 30 million shares at $10 to raise $300 million for automation and supply-chain technology. Back in Dix Hills, Michael decided he was going to hold on to his 1,000-share position... Although he was skittish, he figured that a Goldman Sachs-led IPO wouldn’t “break below” the deal price of $10. Typically, the lead banker does whatever it can to support their own deal. No one likes to see a failed IPO on the first day. So Michael felt somewhat comfortable holding on. And he was glad he did as he watched the first few hours of trading... The stock rose almost 10%... at first. And then it started to sell off. But on the way down, Michael decided to double his bet

26 | August 2017

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