BROOKLYN (CN) — Blue Apron and its stock underwriters misled investors about the meal-kit service’s business strategy and prospects, causing its share price to fall nearly by half just two months after its IPO, shareholders say in a federal class action.
Blue Apron delivers ready-to-cook meals by mail, accompanied by instructions. It offered shares at $10 at its initial public offering in June, valuing itself at $1.9 billion. It raised $300 million with its IPO.
Its share price has declined steadily, to $5.39 on Thursday, a decline of 46 percent, making it the worst-performing large IPO of 2017.
Lead plaintiff Rustem Nurlybayev sued Blue Apron, CEO Matt Salzberg, Goldman Sachs and 10 other underwriters of the company’s IPO on Thursday.
Nurlybayev claims that one week ago Blue Apron “shocked the stock market by announcing significant undisclosed problems, lowering its guidance for the second half of 2017, and stating that it planned to change its strategic approach for managing the business for the remainder of 2017.”
According to the 26-page lawsuit, the company’s registration statements failed to disclose that it already had decided to significantly reduce spending on advertising, which would hurt sales, and that it was suffering delays in receiving ingredients on time, hurting customer retention.
Nurlybayev says investors should have been told that “the delays being experienced by the company would hurt the company’s bottom line in the near-term, particularly affecting the important metric of lifetime value per customer, or the net profit Blue Apron makes off a customer.”
The company recorded 18 percent revenue growth in the second quarter of this fiscal year, but only by reducing advertising expenses from $61 million to $35 million, according to the complaint.
“This emergency reduction in advertising spending was not disclosed in the prospectus, and was hardly what investors expected from a company which stated it was rapidly expanding and that increased spending on advertising was key to the company’s new product initiatives and future success,” the complaint states.
Nurlybayev seeks class certification, a jury trial, and damages for three counts of violations of the Securities Act.
He is represented by Fred T. Isquith with Wolf, Haldenstein, Adler, Freeman & Herz in New York City.
Blue Apron could not be reached for comment after business hours Thursday.
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