After passing through stages of shock, guilt, anger, bargaining and hope, the poor schmucks who subjected themselves to Blue Apron's IPO finally reached the ultimate stage in any grieving investor's emotional journey: class-action lawsuit. In an essentially simultaneous group attack, law firms big and small leapt at the meal-delivery company, alleging that investors were not properly informed of the risks inherent in an enterprise built on sending people individually wrapped meals they have to assemble and cook themselves.
In particular, the complaints revolve around allegations that Blue Apron did not disclose delays at a new fulfillment center in New Jersey, which the company disclosed when it reported earnings earlier this month. The complaint also alleges that Blue Apron was aware of Amazon’s plans to enter the meal-delivery business and that the company didn’t warn of a planned decrease in ad spending in the second half of 2017, which could drag down its revenue growth.
It's OK to be a little incredulous that investors claim not to have known about Amazon before purchasing, in this guy's case, 10,000 shares of Blue Apron. So go ahead and read the complaint for yourself. The list of things lawsuit claims Blue Apron withheld from shareholders does indeed include both a one-off factory delay in New Jersey and Blue Apron's inevitable doom at the hand of a juggernaut competitor that unironically calls itself The Everything Store. It's a bit like survivors of the Hindenburg complaining that the air in the cabin was too stuffy before it burst into flames.
The lawsuit also alleges that, prior to its disastrous first quarterly report, Blue Apron failed to inform investors that it had decided stop hemorrhaging marketing costs, thus slowing customer growth, and that it had experienced issues with retention. So it's worthwhile to ask: who could have known all this, had the company not included these particular risks in 60-point red font on the first page of its S-1?
To which we answer: anyone halfway literate. We here at Dealbreaker told you Blue Apron was a clusterfuck of an IPO. We told you about the Amazon factor. We told you about the discount and retention problems. We might not have foreseen technical delays at the Linden warehouse, but let's let that one slide.
The point here isn't that Dealbreaker is particularly astute; in fact it's the opposite. Even we, a site that any truly honest investment manager has a fiduciary duty to avoid reading, knew Blue Apron going public would end in tears. No reasonable investor has a decent excuse here.
All of that aside, it's clear that Blue Apron took a significant turn in its first few months as a public company. As a startup, the company rode on a wave of subsidies and marketing gimmicks as long as investors would keep shelling out for them. It warrants some suspicion that as soon as it went public, Blue Apron decided to rejigger its model to one inherently less growth-oriented.
But even if there are legitimate investor gripes, the legal feeding frenzy of stock-drop challenges doesn't inspire confidence in their validity. See, for instance, the Blue Apron class-action signup form for Glancy Prongay & Murray. Like others, it asks potential class members to fill out a form indicating name, address, how many shares they bought and when. It also requires the prospective client to click a box certifying that she “has reviewed the Complaint and authorizes its filing and/or the filing of a Lead Plaintiff motion on Plaintiff’s behalf.”
But here's what you see when you click on the link for the complaint:
It's tough to trust a law firm that asks its own clients to declare, under penalty of perjury, that they have read a nonexistent document. Then again, we're talking Blue Apron investors here.