- The stock price of Blue Apron Holdings Inc (NYSE: APRN) increased by over 44% yesterday. This is why it happened.
The stock price of Blue Apron Holdings Inc (NYSE: APRN) increased by over 44% yesterday. Investors are responding positively to the company’s changes in voting structure and the board.
Blue Apron had announced $78 million of a planned equity capital raise, including a $45 million fully backstopped rights offering to holders of its Class A common stock and holders of certain warrants to purchase Class A common stock, a private placement with the backstop provider (an entity affiliated with Joseph N. Sanberg) for gross proceeds of $30 million — which will close promptly following the consummation of the rights offering subject to customary closing conditions and the closing of a $3 million private placement with the company’s co-founder Matthew B. Salzberg. In connection with the equity capital raise, Blue Apron also announced changes to its board of directors and capital structure.
Pursuant to the terms of the fully backstopped rights offering, Blue Apron plans to issue, for no consideration, non-transferable subscription rights — which will entitle eligible holders as of the record date to purchase their pro rata amount of $45 million of (i) shares of Class A common stock, (ii) warrants to purchase additional shares of Class A common stock at an exercise price of $15 per share, (iii) warrants to purchase additional shares of Class A common stock at an exercise price of $18 per share, and (iv) warrants to purchase additional shares of Class A common stock at an exercise price of $20 per share.
The warrants will have a term of 7 years from the date of issuance. And no fractional shares of Class A common stock will be issued in the rights offering, or upon exercise of the warrants. The participants in the proposed rights offering will need to exercise multiple rights and pay an aggregate subscription price of at least $10 to participate in the rights offering and for each $10 will receive 1 share of Class A common stock as well as the ratios of associated warrants — 1 warrant for 0.8 of one share with a $15 exercise price per share, 1 warrant for 0.4 of one share with an $18 exercise price per share, and 1 warrant for 0.2 of one share with a $20 exercise price per share.
Blue Apron has entered into a purchase agreement with RJB Partners LLC, a Class A stockholder and an affiliate of Joseph N. Sanberg (a founding investor of the company) and Matthew B. Salzberg (a co-founder of the company). Joseph N. Sanberg proposed an investment of up to $75 million in the company in the form of a private placement and agreed to make $45 million of the investment available to the company’s existing stockholders and to backstop that amount in full. And pursuant to the terms of the purchase agreement, RJB Partners LLC has agreed to purchase in the concurrent private placement on the same terms as the rights offering and for an aggregate purchase price of $30 million, (i) 3 million shares of Class A common stock, (ii) warrants to purchase 2.4 million shares of Class A common stock at an exercise price of $15 per share, (iii) warrants to purchase 1.2 million shares of Class A common stock at an exercise price of $18 per share, and (iv) warrants to purchase 600,000 shares of Class A common stock at an exercise price of $20 per share.
The purchase agreement also commits RJB Partners LLC to buy in a private placement, any and all shares of Class A common stock and warrants that remain unsubscribed for in the rights offering for an aggregate purchase price equal to $45 million less the aggregate gross proceeds received from participants in the rights offering. Pursuant to the terms of the purchase agreement, the backstop private placement and concurrent private placement are expected to close concurrently, shortly after the expiration of the rights offering subscription period.
Under the purchase agreement, the company agreed to provide RJB Partners LLC with certain customary registration rights with respect to the securities purchased in the Backstop Private Placement and Concurrent Private Placement.
Pursuant to the terms of the purchase agreement, Blue Apron also sold to Matthew B. Salzberg, on the same terms as the proposed rights offering, Backstop Private Placement, Concurrent Private Placement, and for aggregate gross proceeds of $3 million, (i) 300,000 shares of Class A common stock, (ii) warrants to purchase 240,000 shares of Class A common stock at an exercise price of $15 per share, (iii) warrants to purchase 120,000 shares of Class A common stock at an exercise price of $18 per share, and (iv) warrants to purchase 60,000 shares of Class A common stock at an exercise price of $20 per share.
The Salzberg Private Placement closed concurrently with signing the purchase agreement. And under the purchase agreement, the company has agreed to provide Matthew B. Salzberg with certain customary registration rights with respect to the securities purchased in the Salzberg Private Placement.
RJB Partners LLC’s obligation to buy the securities pursuant to the purchase agreement and to fulfill its backstop commitment and the company’s obligation to issue the securities in the Concurrent Private Placement and the Backstop Private Placement are subject to certain customary closing conditions, including completion of the proposed rights offering. The rights offering, Backstop Private Placement and Concurrent Private Placement are expected to close in the fourth quarter of 2021.
Blue Apron plans to use the net proceeds of the rights offering, Backstop Private Placement, Concurrent Private Placement, and Salzberg Private Placement to:
1.) Accelerate its growth strategy to drive revenue and customer growth;
2.) Build a framework to establish an ESG program and advance its sustainability goals; including achieving carbon neutrality targets by early 2022; and
3.) Increase wages, benefits, and training for its hourly employees.
Blue Apron is also permitted by the terms of the purchase agreement to use the proceeds of the transactions to repay up to $5 million of outstanding indebtedness.
In connection with the Salzberg Private Placement and the proposed transactions, Matthew B. Salzberg, the company’s co-founder and board chair, and Barry Salzberg, have resigned from the company’s board of directors to focus on their other board roles and business interests. And Blue Apron said it appreciates Matthew B. Salzberg’s and Barry Salzberg’s dedication to the company and continued support. The board of directors has appointed Jennifer Carr-Smith, a current independent board member, to succeed Matthew B. Salzberg as board chair.
In connection with the rights offering and related financing transactions, certain of Blue Apron’s existing holders of Class B common stock, including Matthew B. Salzberg, Barry Salzberg, Joseph N. Sanberg, and certain of their respective affiliates, have converted their shares of Class B common stock, each share of which is entitled to 10 votes per share, to shares of the company’s Class A common stock, which is entitled to 1 vote per share. And as a result of these conversions, pursuant to the company’s restated certificate of incorporation, as amended, which provides for the automatic conversion of all outstanding shares of Class B common stock when the outstanding shares of Class B common stock represent less than 5% of the combined voting power of the outstanding shares of Class A common stock and Class B common stock, each outstanding share of Blue Apron’s Class B common stock automatically converted into one share of Class A common stock. As a result, effective immediately, Blue Apron only has 1 class of common stock outstanding, Class A common stock, each share of which is entitled to one vote.
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