industry insider | Jan 11, 2020 |
Casper is going public in a time of scrutiny for startups

Last year’s biggest IPO story—WeWork—was a nightmare. Casper, the direct-to-consumer mattress company, is hoping its initial public offering will be a dream.

The five-year-old startup filed paperwork on Friday, announcing its intent to sell shares on the New York Stock Exchange with the ticker name CSPR. The starting price of the stock was not announced, nor was the date of the sale or the number of shares to be issued.

What the filing did make clear: Casper has been operating at a heavy loss, year over year. In 2017, it lost $73.4 million. In 2018, $92.1 million. In the first nine months of last year, Casper lost $67.4 million. The filing acknowledges the bright red balance sheet, and suggests that the losses are likely to continue for the foreseeable future. “We have a history of losses,” reads a section outlining potential risks, “and expect to have operating losses and negative cash flow as we continue to expand our business.”

Casper has been operating at a heavy loss, year over year.

On the plus side, Casper is bringing in plenty of cash. Last year, the company made $312 million in the first nine months of the year, outpacing 2018 numbers by 20 percent (though it will likely fall short of its stated yearly goal of $556 million for 2019). Casper estimates that the global “sleep economy” is worth $432 billion, a number that lies at the core of the bet inherent to the IPO—that there’s plenty of room to grow.

What accounts for the discrepancy between revenue and profit? One culprit is brand building. Perhaps no surprise to anyone who has taken the New York City subway or listened to a podcast, Casper spends heavily on advertising and marketing—from 2016 through 2019, a whopping $420 million.

The filings point to the strength of the Casper brand—the company’s name is almost synonymous with its category—but also its inherent vulnerabilities: “Our business depends on the strength of our brand, and if we are not able to maintain and enhance our brand, we may be unable to sell our products.” One potential area of risk? “[Our] use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.” (In case you’re curious, the word “influencer” appears in the filing nine times.)

The filings also suggested that, while the brand’s reputation has been built selling mattresses online, Casper will continue to bet big on physical retail. It currently operates 60 stores, and suggested that that number might climb as high as 200. That’s in addition to Casper’s partnership with Target to sell in stores across the country.

The news comes in the midst of a difficult period for high-profile IPOs. Even train wrecks like WeWork aside, the most hyped members of the class of 2019 (Uber, Lyft and Pinterest come to mind) have mostly struggled with languishing stock prices. As a result, Casper’s initial public offering will face heightened skepticism and scrutiny on Wall Street. The stock’s performance will likely serve as a bellwether for the year to come; if it goes well, Casper’s executives won’t be the only ones sleeping easy.

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