Shares of meal kit company Blue Apron (NYSE:APRN) fell off a cliff around 11:00 a.m. Eastern today after the company announced a 1-for-12 reverse split. Shares of APRN stock are now down roughly 15% from yesterday’s close, hovering around the lowest levels of the session at the time of this writing.
Any time a company issues a reverse split, that’s a signal to the market that all is not well. Most exchanges have mandatory stock price minimums that companies are required to maintain to keep their listing. If shares stay below the $1 level, for example, many firms face the prospect of having their stock delisted.
Accordingly, reverse splits typically only happen when companies are forced to conduct them. However, forcing a stock price higher by lowering the outstanding share count is a methodology that just works in the near term. If a given company’s enterprise value continues to drop, reverse splits can’t stop the bleeding of an ever-decreasing share price.
With that said, let’s dive into the particular details of the APRN stock split today.
APRN Stock Dips on Reverse Split Announcement
Blue Apron’s 1-for-12 reverse split essentially means that the company’s outstanding share count of around 76 million shares will drop to roughly 6 million shares. This split is expected to take place after market close today, June 7. APRN will begin trading on a split-adjusted basis at the start of trading tomorrow, June 8.
Of course, this whole reverse split announcement came upon investors rather quickly. A vote at the company’s annual meeting today led to the decision, which was then enacted promptly. As a result, some investors appear to not have gotten the memo that this reverse split was about to take place.
In any case, the market seems to be taking this reverse split as a negative signal. Fundamentally, Blue Apron’s core business isn’t as strong as it once was during the pandemic. Life is back to normal and with other inflationary pressures impacting consumers, more expensive meal kits (relative to customers shopping on their own) may be out of favor, especially if recessionary forces take hold. These factors appear to be driving APRN stock lower — and may continue to do so moving forward.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.