Updated Feb 6, 2020 - Economy & Business

Unpacking Casper's sleepy IPO

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

Casper falls below unicorn status in new IPO filing

Photo: Rachel Murray/Getty Images for Casper Sleep Inc.

Mattress maker Casper Sleep on Monday seemed to acknowledge skepticism toward its upcoming IPO by disclosing that it doesn't expect to maintain the "unicorn" valuation it received from venture capitalists.

The bottom line: Casper plans to price shares at between $17 and $19, giving it a midpoint valuation of $705 million. It last raised private funding in early 2019 at a valuation of nearly $1.1 billion.

Go deeper: Casper lists inability to control social media influencers as IPO risk

Keep ReadingArrowJan 27, 2020

The IPO-pocalypse didn't last long

Photo: Alex Tai/SOPA Images/LightRocket via Getty Images

The IPO-pocalypse sure didn't last long.

What's happening: Three months after WeWork pulled its offering, we're expecting an offering above $1 billion this week and another next week. It also appears that mattress maker Casper will push forward with its listing, albeit as an "undercorn."

Go deeperArrowJan 27, 2020

Online dollar store Hollar to wind down

Illustration: Eniola Odetunde/Axios

Hollar, an e-commerce company that raised more than $75 million in VC funding, is expected to wind down soon, Axios has learned from multiple sources.

Between the lines: It's been a very tough month for direct-to-consumer startups, beginning with Casper Sleep's uninspired IPO and Monday's shutdown of SoftBank-backed Brandless.