Casper Sleep (NYSE: CSPR) is a U.S. based e-commerce company that sells sleep products and mattresses online. Shares of the company soared 27% in its market debut.
Casper priced it’s initial public offering at $12 per share. Expected IPO price was between $17 – $19 per share. This nearly cut the company’s valuation in half. At one point, Casper was valued at $1.1 billion.
Casper’s Preliminary 2019 Financial Results
Casper’s 2019 financial results were mediocre at best. The company reported revenue of $439 million for the year, but lost nearly $94 million. This represented a 2% year over year rise in losses, compared to their 2018 year.
Casper blamed losses were due to a rise in expenses, and marketing to continue it’s growth in retail stores. However, this raises the question of whether this increased spending and cost for acquisition will be needed to continue the company’s growth moving forward.
Mounting losses make it difficult for a company to survive in the public markets. The debacle of IPO’s in 2019, involving unprofitable companies seem to be a theme carrying over into 2020. Companies like Uber (UBER), Peloton (PTON), Slack (WORK), and Pinterest (PINS) had all lost nearly 50% of their value months after their market debut’s.
Will the public markets digest this IPO in the same light? This is a question that investors should be thinking about considering the company is unprofitable and faces rising competition from companies like Purple (PRPL), Tuft and Needle, Amazon (AMZN) and Walmart (WMT).
Casper (CSPR) will have to make some serious adjustments to reach profitability. If the company decides to cut their spending, this may have a significant impact on their revenue growth going forward. Their valuation haircut should also be worrisome for average retail investors.
CEO, Phillip Krim, said in a statement ”Valuations are just moments in time. This is obviously a huge milestone for us. It doesn’t stop us from building the business that we want to build.”
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