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Illustration: Aïda Amer/Axios

Casper Sleep, the mattress retailer that was valued at more than $1 billion by venture capitalists, last night priced its IPO at the bottom of an already-slashed price range.

Reality check: Yes, this went just about as badly as most of us thought it would. No, it shouldn't be used as an avatar for the broader IPO or DTC markets.

Bad bed: Casper originally filed to price shares at between $17-$19, which already signaled a bit of a valuation haircut. Then it slashed the range to $12-$13, with insiders NEA and IVP agreeing to buy around 10% of the float (a very unusual move for VCs, outside of biotech). It ended up pricing at just $12 per share, for an initial market cap of $476 million and a fully-diluted value of around $547 million.

History: Casper held sales talks in 2017 with Target. What happened next depends on who you talk to. One version is that Casper walked after Target came about $100 million short of its $1 billion asking price. Another version is that Target never formally bid, after concluding it was uncomfortable with owning a long replacement cycle product that takes up lots of floor space.

  • Target did end up making a minority investment, either because it still thought the company had upside (version #1) or as a make-good (version #2).

Investor reaction: This is an unprofitable consumer product company whose IPO prospectus seems to suggest that it discovered people like to have a buffer between themselves and the floor. It has a ludicrously generous return policy that mainly benefits landfill owners, and doesn't break out its non-mattress product sales.

  • Plus, it has tons of competition ⁠— from the high end to low end, upstart to incumbent. One of those upstart rivals, Purple, has slightly higher revenue and a market cap just north of $700 million.

The big picture: Casper began life as a direct-to-consumer company and, like many other DTC startups, has expanded into physical retail (both third party and its own branded stores). But that's where many of the similarities end.

  • As Target realized, mattresses have very long replacement cycles. Even if you love your Casper mattress, chances are you don't plan to buy another one for years (maybe even a decade). It's more like luggage than shoes or makeup, let alone like software.
  • That's why Casper has worked to expand its product line into peripherals that range from bed-sheets to CBD gummies (to help you sleep). But Casper's decision to not provide data into how these other offerings have fared is not encouraging.
  • On the broader IPO front, two other companies this morning will list after pricing at the top of their range.

The bottom line: Conventional wisdom was right, but too much extrapolation would be wrong.

Go deeper: Casper falls below unicorn status in new IPO filing

Go deeper

In photos: D.C. and U.S. states on alert for pre-inauguration violence

National Guard troops stand behind security fencing with the dome of the U.S. Capitol Building behind them, on Jan. 16. Photo: Kent Nishimura / Los Angeles Times via Getty Images

Security has been stepped up in Washington, D.C., and state capitols across the U.S. as authorities brace for potential violence this weekend.

Driving the news: Following the Jan. 6 insurrection at the U.S. Capitol by some supporters of President Trump, the FBI has said there could be armed protests in D.C. and in all 50 state capitols in the run-up to President-elect Joe Biden's inauguration Wednesday.

11 hours ago - Politics & Policy

The new Washington

Illustration: Sarah Grillo/Axios

The Axios subject-matter experts brief you on the incoming administration's plans and team.

Rep. Lou Correa tests positive for COVID-19

Lou Correa. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Rep. Lou Correa (D-Calif.) announced on Saturday that he has tested positive for the coronavirus.

Why it matters: Correa is the latest Democratic lawmaker to share his positive test results after last week's deadly Capitol riot. Correa did not shelter in the designated safe zone with his congressional colleagues during the siege, per a spokesperson, instead staying outside to help Capitol Police.