Should Blue Apron have been more transparent with investors?

Aug 10, 2017

The meal-kit delivery service, Blue Apron, filed its first quarterly results Thursday morning, revealing greater than expected losses and sending their stock price plummeting by 15 percent. 

The company's stock value is half of what it was when Blue Apron first began trading just six weeks ago. Sure, not every promising company has a successful IPO. But there were actually key financial figures that Blue Apron maybe should have disclosed to potential investors as it went public, argues University of Michigan professor Erik Gordon.

He joined us to talk about what information was unclear, along with what the Securities and Exchange Commission should do when vetting companies that go public. 

David Brancaccio: Longer-term who knows, but so far Blue Apron hasn't been much of an investment it seems.

Erik Gordon: Yeah. I mean you buy the stock, you think you're getting in on a good thing. Five weeks later, you've lost 40 percent of your money. How are you feeling?

Brancaccio: It's true. But the prospectus on that stock never said it was a guaranteed bet, that the stock wouldn't go down. It's just I know it's been disappointing to many.

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Gordon: Well, you know, stocks go up, they go down. Some IPOs have done really well; not so much Blue Apron. Remember Facebook? It was a disaster for its first year. But long term, not a bad stock.

Brancaccio: But your sense here is that perhaps Blue Apron could have been a little bit more open to potential investors about the risks?

Gordon: Blue Apron disclosed about as much as any company discloses, but they didn't make some of the really important disclosures clear. Blue Apron: they deliver boxes of ingredients, you cook it into meals. It's really important to know how much it costs Blue Apron to acquire a new customer. And it's important to know how long a customer remains a customer and keeps ordering boxes, because if it costs you $200 to acquire a new customer, and you make say 20 bucks profit every time they buy a box, you don't make any money until you've sold 10 boxes and that wasn't really clear in Blue Apron's 200-plus pages of disclosures.

Branacaccio: You might think regulators like the Securities and Exchange Commission, might nudge companies like this to disclose crucial material information like that.

Gordon: It turned out that some pretty important stuff was pretty unclear. And you have to wonder how many people lost money who wouldn't have lost money if the SEC had forced Blue Apron to be a little clearer.

Brancaccio: So the SEC needs to do a little homework itself?

Gordon: I think the SEC needs to push back harder on the companies and the SEC needs to be sure it understands some of the new business models that companies like Blue Apron and Snap and a lot of the companies that are coming out now follow. They're models that aren't like the old industrial models. So the SEC needs to push hard and it needs to push hard on the right things, because if it pushes hard on the wrong things, the trivia, it's just back to the old company whining about too much regulation.