Snap, Blue Apron fuel worries about overheated IPOs

FILE PHOTO: The Blue Apron logo is pictured ahead of the company
FILE PHOTO: The Blue Apron logo is pictured ahead of the company's IPO on the New York Stock Exchange in New York,  

By Lewis Krauskopf and Noel Randewich

NEW YORK/SAN FRANCISCO (Reuters) - Snap Inc and Blue Apron Holdings Inc's dismal quarterly reports on Thursday, which sent their shares slumping, join a growing list of technology startups failing to live up to sky-high expectations set ahead of their initial public offerings.

There are growing concerns in Silicon Valley that the dominance of Alphabet Inc's Google, Facebook Inc, Apple Inc and Inc are beginning to squeeze the life out of the startup economy, and even large would-be challengers, including Snap and Twitter Inc, are struggling to maintain growth.

Snap, the owner of Snapchat, dropped 17 percent in extended trade after its second quarterly report as a publicly listed company missed Wall Street's estimates and added to fears the social media company is succumbing to competition from Facebook.

Earlier, Blue Apron lost nearly a fifth of its value after the meal-kit delivery company's first quarterly results following its June IPO also missed estimates and compounded worries that will eat its lunch.

Snap's $3.4 billion IPO five months ago was the largest by a U.S. technology company in three years, despite concerns about slowing user growth and a warning by the company that it might never become profitable. Facebook's Instagram has since launched features copying popular features from Snap. Inc registered a trademark for a similar meal-kit service last month, heralding even more competition to come for Blue Apron, which already competes with dozens of startups. That move, along with Amazon's industry-altering deal to buy upscale grocer Whole Foods Market Inc, has weighed on Blue Apron's shares since their market debut.

"You have large players like Amazon, Google, Facebook and others with big pockets that can say 'This is a space we want to own,'", said Philippe Collard, founder of Yabusame Partners, a management consulting firm specializing in the technology industry. "I would not be surprised to see further attempts to go public be much more cautious."

Other young technology companies also failed to live up to Wall Street's hype in recent years. Fitbit Inc surged to over $50 from the $20 price set in its 2015 IPO, but has since sunk to under $6.

With some early stage investors worried about valuations, financing of new startups has been declining for the past two years.

An analysis by Reuters in February showed that globally, shares of most of the 25 largest technology IPOs have languished in their first 12 months on the public market. Sixteen of them had a big decline from their debut day closing price, according to a Reuters analysis of market performance.

Click here for a look at the performance of 10 top IPOs in their first year on the market:

(Reporting by Lewis Krauskopf and Noel Randewich; Editing by Bill Rigby)


More Related News

U.S. regulators ditch net neutrality rules as legal battles loom
U.S. regulators ditch net neutrality rules as legal battles loom

The U.S. Federal Communications Commission voted along party lines on Thursday to repeal landmark 2015 rules aimed at ensuring a free and open internet, setting up a court fight over a move that could recast the digital landscape. The approval of FCC Chairman Ajit Pai's proposal marked a victory

Former Facebook exec Chamath Palihapitiya: Uber is
Former Facebook exec Chamath Palihapitiya: Uber is 'the great American tragedy playing out'

Over the course of 2017, Uber went from one of the most admired companies in Silicon Valley to one of the most vilified. Many executive heads have rolled including former CEO Travis Kalanick. The wave of scandal and controversy that washed over Uber this year has been nothing short of spectacular.

3 Reasons Apple Will Reach $1 Trillion in 2018
3 Reasons Apple Will Reach $1 Trillion in 2018

As we approach the New Year, investors are focused on the biggest tech behemoth of them all, Apple (AAPL), as the iPhone maker nears the $1 trillion market cap milestone. Here are three catalysts that should lift Apple to the $1 trillion mark in 2018!

Jose Canseco Calls Women Who Complain About Sexual Misconduct
Jose Canseco Calls Women Who Complain About Sexual Misconduct 'Racist Against Ugly Men'

Twitter is a powerful tool. Anyone who has an account can turn the thoughts flitting through her or his mind into a public statement within seconds. Jose Canseco, the former Major League Baseball player, might be learning that lesson the hard way after posting a series of tweets about sexual misconduct

Bought Apple Stock in 1980? Held It? Don
Bought Apple Stock in 1980? Held It? Don't Brag

An investor who purchased at the IPO price is rich today. But nobody can say they saw it coming.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Economy

Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.