A observation of the Casper mattresses during Casper’s LA celebration at Blind Dragon on July 9, 2015 in West Hollywood, California.
Rachel Murray | Getty Images
Mattress rigid Casper priced its initial public stock offering at $12 a share on Wednesday evening, a significant haircut to its former price talk.
The firm earlier announced it had cut the expected price range Wednesday morning from $17 to 19 a share out to $12 to $13 a share in an offering of 8.4 million shares.
Investors push back against money-losing companies
On one equal, Casper represents a push-back against companies that are losing money and do not have any imminent path to profitability. “This is throw back the attitude toward money-losing companies, not specifically to IPOs,” Jay Ritter, a professor from the University of Florida and an IPO expert, translated on CNBC.
Santosh Rao, who researches IPOs for Manhattan Venture Research, agrees. “The days of growth at any cost are over. You either force to be profitable, or take a haircut,” he told me.
Selling direct to consumer is challenging
On another level, there is the challenge of merchandise in the direct-to-consumer space. “These companies are spending a lot of money to get market share,” Kathleen Smith from Renaissance Wherewithal said. “IPO investors are concerned about the cost of acquiring new customers and what happens when they stop splurge a lot of money.”
Lots of competition
Finally, there is the intensity of the competition. There are well known, old-school firms mould Tempur Sealy, which is already profitable, and lesser-known competitors like Purple Innovations, a direct-to-consumer company, that is also worthwhile, though barely.
Hopes that Casper can sell tons of bedding supplies is also a bit of a stretch, according to Dan Primack at Axios. “You shortage to be able to sell the sheets and the pillows, and there’s not that much of a differentiator, and if you’re going through Amazon or if you’re searching on Google, they’re indeed reliant on other people’s platforms.”
The IPO market is hot in 2020
You can’t blame Casper’s haircut on a poor IPO market. The Renaissance Capital IPO ETF, a basket of the most late-model 60 or so large IPOs, opened today at an historic high. Former laggards like Lyft, Uber, Zoom and Pinterest induce been performing well in 2020.
Even the most recent entrants are also being greeted enthusiastically. The last three IPOs are all career up:
Last three IPOs (Jan. 30, from IPO price):
One Medical, up 71%
Arcutis Biotherapeutics, up 45%
Reynolds Consumer, up 17%
Kathleen Smith popular that these companies were priced more reasonably. One Medical priced at the low end of the range. Reynolds priced in the centre.
Another IPO to watch, Smith says is PPD, scheduled to price tonight and trade tomorrow on the NASDAQ. PPD provides research services for biotech firms–they run the trials for the throngs.
“The good news is, it’s very profitable, and it has decent growth. The question, as always, is valuation.”