Blue Apron Falls After Amazon Files for Meal-Kit Trademark

Blue Apron Falls After Amazon Files for Meal-Kit Trademark

The Motley Fool owns shares of and recommends Amazon and Whole Foods Market.

Shares of the meal-kit delivery company sank as low as $6.51, a 35 percent drop since its initial public offering.

Following its $13.7 billion acquisition of Whole Foods Markets, Amazon recently filed a trademark application for meal kits. Amazon has registered a USA trademark for what looks suspiciously like a meal-kit service with the slogan "We do the prep". "The trademark application mentions "... customer loyalty rewards program for shoppers, namely, providing incentive award programs for customers through the issuance and processing of loyalty points and loyalty coupons for frequent use of participating company's goods and services..." and services related to the loyalty program. When you combine that with slowing revenue growth, dismal customer retention rates, contracting margins, and rising expenses, Blue Apron becomes a high-risk stock for investors' money.

Blue Apron went public shortly after the Whole Foods acquisition was announced, pricing at the bottom of an already slashed valuation.

The New York-based company had tried to quell fears about potential competition from the e-commerce giant on its IPO roadshow by telling investors that its offering is different than basic grocery delivery, a person familiar with the matter said at the time.

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Amazon is gearing up to snag a chunk of the $2.2 billion-and-growing meal kits business.

A German Blue Apron competitor, HelloFresh, is also reportedly mulling an IPO. Blue Apron went public on June 29 with an opening price of $10 per share, down from the $15 to $17 per share it had initially sought.

Amazon is entering the meal kit business. Blue Apron said in its IPO prospectus that it believes its cash and borrowing capacity will be sufficient for at least a year.

Blue Apron stock was at $6.75, down 61 cents or 8.3%, in mid-morning trading Monday.