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Blue Apron (NASDAQ:APRN), once a high-flying meal kit maker that became a penny stock when the boom fizzled, fell 30% overnight after it revealed a financing deal that will dilute the stock.
The prospectus on the deal covers Blue Apron’s issuance of up to $30 million in new shares. The offered price is listed at $1.45 per share, but the net tangible book value is listed at 92 cents.
APRN stock fell 30% overnight to $1.19.
Blue Apron Is in Survival Mode
Blue Apron is in survival mode, as sales are down 50% from its heyday. The company lost $25.8 million in its September quarter, or 74 cents per share, on revenue of $109.7 million. Cash on hand by Sept. 30 was just $31 million against $82.2 million at the start of the year.
Before the prospectus came out, speculators were targeting Blue Apron stock for a short squeeze. The value jumped 20% on Nov. 10 to a market cap of nearly $69 million. The overnight losses brought the value below $50 million, so $30 million in new stock would mean substantial dilution to current shareholders.
The company seemed to be on the comeback trail. It began selling its meal kits through Amazon (NASDAQ:AMZN) in October. It is rolling out seasonal offerings like a holiday roast. One of its kits was even featured on a show by food celebrity Alton Brown.
But analysts were warning investors away. Just because a company falls from $1.9 billion in its heyday to $60 million doesn’t make it a bargain. The quarterly numbers were seen as a red flag.
Hope came in the form of the short squeeze. The story came out while the market was melting up on good news about inflation. The hope was that $57 million from early investor Joseph Sanberg might turn things around.
But the dilution dashed those hopes. You can’t squeeze a stock that’s getting new shares equal to half its market cap.
What Happens Next for APRN Stock?
Based on the September numbers, Blue Apron can’t survive much past Christmas without new funding. Its track record doesn’t show it’s worthy of that funding. Get yourself a cookbook.
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On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.