Morning Report: Why Blue Apron’s Dramatic IPO Repricing Is Bad News For Unicorns

Morning Report: A day after we noted that Blue Apron’s IPO would continue the trend of unicorns going public at up valuations, it repriced. Let’s figure out what happened and what it means.

Blue Apron, the popular meal-kit startup pursuing an IPO, will price its shares dramatically lower in its public debut than previously expected. Ahead of its formal pricing, which should take place this afternoon, the firm cut its IPO price range from $15 to $17 per share to $10 to $11 per share.

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From high point to low point, that’s a 41.2 percent decrease. Midpoint to midpoint it works out to a smaller 34.4 percent decline.

Both, regardless, are steep.

Repudiation

Blue Apron, which must engage public investors in the post-Amazon-Whole Foods world, will now go public at a “valuation of up to $2.08 billion, compared with $3.2 billion earlier,” according to CNBC. Fortune agrees on the math.

And as you might expect, the valuation shift downward matters in terms of both direction and scale.

Zooming in on scale, here’s the math from Crunchbase regarding Blue Apron’s last round of capital, its $135 million Series D:

As you can certainly sum alone, the company’s D, according to those tidbits, works out to a $2.135 billion post-money valuation. That’s a larger number than $2.08 billion.

Therefore, if Blue Apron prices in-range this afternoon, it will manage a not-quite-flat IPO from its last private valuation. Why does that matter? Hang tight, we’ll do the math for you:

Changing Multiples

Regular readers will be happy to note that we haven’t spent much time in recent weeks diving into revenue multiples, mostly because cryptocurrencies lost their damn minds at the same time that Uber went through a leadership shakeup. It’s been busy.

But we can get back to it today, as we have the perfect opportunity. At a gallop:

• In 2015, Blue Apron recorded $340.8 million in revenue.
• At its mid-2015 valuation of $2.135 billion, investors that bought its shares paid around $6.3 dollars for every dollar of revenue it generated that year.
• In 2016, Blue Apron recorded $795.4 million in revenue.
• At its first price range, and its then-possible valuation of $3.2 billion, investors would have paid around $4.0 dollars per dollar of revenue it generated in the year.
• At its second price range, and its $2.08 billion valuation, the firm is now selling revenue for $2.6 dollars per dollar, using its 2016 results as denominator.

And we could, of course, make the final multiple all the more conservative by taking into account the company’s known first quarter growth, and its expected second quarter number pick a new revenue estimate for 2017 to use as a numerator. The result would be more revenue, and the same valuation, implying an even steeper repricing of Blue Apron’s sales.

It’s expected that Blue Apron would see a decline, over time, in the value of its revenue. That would imply a shrinking price-sales multiple as its growth, on a percentage basis, slows over time, which is reasonable. But, to see its IPO valuation fall, and thus its revenue reprice at the pace it currently has, is surprising.

This leads us to the why, and the what now.

Happily, Shira Ovide has the why:

Implication: Unprofitable revenue is valued less dearly than expected. And here’s Barrett Daniels, an IPO-land denizen who has a good pulse for public tech debuts, with the so what:

More when Blue Apron prices.

From the Crunchbase Daily:

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• Binary Capital, the venture firm whose co-founder Justin Caldbeck resigned days ago after admitting to misconduct with female entrepreneurs, is shutting down its most recent fund, Bloomberg reports. San Francisco-based Binary had raised about $175 million but invested only a fraction of that so far.

Drive.ai raises $50M

• Drive.ai, a developer of AI software for self-driving vehicles, has raised $50 million in a Series B funding round led by NEA, with participation from GGV and existing investors. The two-year-old Silicon Valley company previously raised $12 million in venture funding.

CastAR is shuttering

• CastAR, a developer of augmented reality glasses and content, is laying off its staff and shutting down. The four-year-old company, based in Silicon Valley and Salt Lake City, previously raised at least $15 million in venture funding.

Pot startup Eaze has security breach

• Venture-backed cannabis delivery startup Crunchbase News reports. Some of its data appears to have been stolen by a former employee of a service company that provides patient consultations for medical cannabis. (For more stories, follow @Crunchbasenews on Twitter.)

Illustration: Li-Anne Dias