Casper Sleep (CSPR) launched its roadshow on Monday, planning to raise $150 million at a fully diluted market cap of $734 million next week.
Casper's long-anticipated IPO will test investor appetite for consumer brands running red ink due to high marketing spend.
Despite the challenges faced by high-loss IPOs in 2019, the well-known bed-in-a-box maker is moving forward with its IPO regardless, for these four reasons:
- It needs money.
Casper ended the third quarter with $55 million in cash, and only $6 million of working capital. However, it burned through more than $100 million over the past year. The company has also taken on $41 million of debt. Its retail and international expansion will require even greater spending, in addition to funding existing operating losses. - Casper's 3rd quarter was better than its 2nd.
Casper submitted its first confidential filing in June 2019, but waited seven months to file publicly, possibly because growth re-accelerated in the third quarter to 24% from 17% in the second quarter, and gross margin surpassed 50% for the first time. Operating loss widened in the 3Q19, and remains one of the company's biggest risks, though its operating margin did improve by about 10 points to -17%. - Purple Innovation is up about 30% over the past month.
Casper's valuation will be pitched next to close peer Purple Innovation (Nasdaq: PRPL). A higher stock price and sales multiple for Purple means a higher IPO valuation for Casper. Purple is up about 75% since Casper first filed confidentially, and 30% in the past month. - US markets are near all-time highs.
The Nasdaq Composite gained 35% in 2019, and hit an all-time high last week. The Renaissance IPO Index was also up 35% in 2019, and its year-to-date return is far outpacing the S&P 500 (5.5% vs. +0.8%). While the recent sell-off in high-loss stocks means that Casper isn't striking while the iron’s hot, it could certainly get a lot cooler.
Get IPO Alerts, enhanced profiles, the IPO Master Calendar and more with IPO Pro.
