Casper’s IPO

Company Background

Casper launched in 2014 with the intention of shaking up the “sleep market” by focusing on e-commerce. Casper sells sleep products like mattresses and pillows that utilize memory foam. At the start, the founders struggled to convince investors that mattresses could be sold online. The start-up focused on financing its operations through debt, allowing the company to fuel its growth. The online mattress company took off, meeting sales goals for their first year in just two months. With a successful start, Casper attracted funds from venture capital firms. In addition to financial backing, they also became popular by associating the brand with celebrities and through the use of quirky ads, slowly becoming a household name.

Casper has grown significantly in the past 5 years and the company believes it is ready to enter the public equities market. Casper has found its niche in the online market, but it is now focused on expanding to retail via its own stores and large brands like Target and Costco. To do so will require a new infusion of cash, which Casper seeks to raise in an IPO.

Valuation

In the most recent valuation of Casper, the company was valued at $1.1 billion. The last year generated over $500 million in revenue. Yet the numbers for this year were underwhelming as the company has been incurring heavy losses in net income. This raises questions about the longevity of the company and worries investors. Casper has not set a date for the IPO, but it is expected to go public in mid-February.

Some have opined that Casper’s IPO is more of sweetener as it looks to sell the company, rather than a traditional capital raise. In 2017, Target reportedly offered 1 billion to purchase the company, but Casper was not interested at the time. Now, as losses have been piling up, Casper may be using the publicity of the IPO to attract a buyer.

Cause for Concern

Casper’s IPO comes at a time were many tech unicorns have been turning to the public markets. As it moves towards its IPO, Casper risks a fumbled start as was the case with WeWork and Uber. The tech unicorns have similarly marketed themselves as disruptive upstarts, looking to transform traditionally cumbersome industries. The poor stock performances of Uber and Lyft in their public offerings create concern for investors looking at Casper. Investors are cautious with growth companies like Casper that accumulate heavy losses in their focus on growth. The recent turbulence in the market for IPOs suggests that Casper might be more focused on using the IPO for a private buyer.

Based on historical precedence, Casper’s IPO may face the same fate as its predecessors (Uber, WeWork, Lyft). Casper also recognizes that they will not be profitable anytime soon. In 2017, Casper had the opportunity to be bought, yet they were confident in their growth. Although banks Goldman Sachs and Morgan Stanley are working on this IPO, the legitimacy of Casper’s IPO is still in question. In the past 6 months, the IPO market has been strained, explaining why banks would quickly want to work on this possible opportunity. Casper draws eerie similarities to other tech unicorns riding the e-commerce trend. Now, as they face losses, they are keen on reviving their brand by going public. Yet, they seem more focused on finding a private buyer before that date comes to fruition.