Casper Is Setting The Tone For IPOs This Year And It Doesn't Look Good
What do 50 Cent, Ashton Kutcher, Leonardo DiCaprio, Kevin Spacey and Target have in common? They're all investors in mattress startup Casper Sleep, commonly referred to as Casper, and they're not going to be happy with their investments.
It was last March when Casper achieved the holy grail of private valuations. Casper raised $100 million in funding at a $1.1 billion valuation, therefore punching its ticket into the elite unicorn club.
Casper was founded in April 2014 and hit a $1 billion valuation, with $340 million in total raised, before its fifth birthday. Everything was going as planned. The next step would be to grace the public markets with the opportunity to invest in Casper via an IPO. Casper did just that on January 10, filing an S-1 with the United States Securities and Exchange Commission to go public.
In the S-1, Casper referred to itself as "a pioneer of the Sleep Economy" going after a $432 billion "global sleep economy." The company's co-founder Neil Parik even said he wants Casper to be the "Nike of sleep." When Casper filed the S-1, it didn't disclose how much money it intended to raise or the valuation it was seeking.
"We bring the benefits of cutting-edge technology, data, and insights directly to consumers, the S-1 read. "We focus on building direct relationships with consumers, providing a human experience, and making shopping for sleep joyful."
At the time, Casper disclosed it lost $92.1 million on $357.9 million in revenue in 2018, compared to a net loss of $73.4 million on $250.9 million in revenue in 2017. Before the botched WeWork IPO last year, investors would salivate over the opportunity to buy a fresh public company with its losses outpacing revenues.
However, times have changed and with it, so has Casper's valuation. Last week, Casper said it would offer 9.6 million shares between $17 and $19 per share, indicating a valuation of $768 million at the top end of the range. The range represented a staggering 30% haircut from the $1.1 billion valuation it received a year ago in the private markets.
Things went from bad to worse when Casper slashed the range of the offering price to between $12 and $13 per share yesterday, indicating a new valuation of $520 million at the top end of the range. After the bell yesterday, Casper priced the IPO at $12 per share, the low end of the new range. At $12 per share, Casper's valuation drops all the way to $472 million, nearly a 60% haircut from the company's $1.1 billion valuation from last year.
As Casper's valuation has plummeted since its final private funding round, it appears even the investors in the later private funding rounds are set to take a hefty loss.
Simply put, Casper was a beneficiary of easy money flooding through the private markets. The company, which obtained unicorn status for shipping mattresses in a box has since expanded into brick-and-mortar stores. Even worse, there's an estimated 175 direct-to-consumer mattress-in-a-box companies, with some of them even manufactured by the same companies.
Ironically, just a few weeks ago when discussing the state of IPOs, New York Stock Exchange President Stacey Cunningham said "The first couple that come out of the gate will really set the tone for the year." If the Casper IPO, which begins trading today on the NYSE under the ticker CSPR, will "set the tone for the year," it appears many of these unicorns may have missed their opportunity to dump shares on gullible retail investors at their private market valuations.
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