Blue Apron's IPO: What Went Wrong?

Blue Apron Holdings Inc APRN opened for trading June 30 at $10 per share, quickly rose to $11.00 and ended its first trading session where it started -- at the $10 level. Fast forward just one week and the stock is sitting near the $8 level.

Expectations were high heading into the food kit delivery's IPO and investors were "salivating" over the offering, CNBC's Jim Cramer said during "Mad Money" on Thursday. But once shares started trading, that optimism didn't matter as the stock's debut was a "bust from start to finish."

After all, one of the hottest trends these days is consumers opting for experiences rather than products, Cramer said. And cooking a meal from start to finish certainly falls under this category, making a "clever and popular concept."

However, the financials behind the stock tell a different and concerning story.

Blue Apron's revenue doubled from $340 million in 2015 to $795 million in 2016, while gross margins grew by a high double-digit over the period through 2016. In 2017, both revenue and gross margin growth notably slowed down and gross margins even fell in the first quarter to 31.2 percent.

"This company's fabulous margins were what made it stand out from traditional grocers, where the margins are razor-thin and continue to be pressured by ruinous competition every day," Cramer said. "Yet now, Blue Apron's margins are getting worse, too, and we've got to wonder if they may have peaked last year."

Bottom line, investors have a hard time imagining the company becoming profitable for a sustainable amount of time. Even worse, if Blue Apron cuts back on spending activity such as in marketing then the competition could easily "steamroll them."

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