Casper’s IPO met with a yawn
Online mattress firm fails to rouse investors on Wall Street
SAN FRANCISCO — Casper Sleep, a startup that sells mattresses online, has become the latest money-losing outfit to get a cold shoulder from Wall Street investors.
The company’s stock began trading Thursday on the New York Stock Exchange at $14.50 a share, slipped below $14 in the afternoon and closed at $13.50. The lackluster first day of trading did not come close to fulfilling what Casper’s venturecapital investors thought it was worth a few months ago.
The 5-year-old startup, based in New York, had been valued at $1.1 billion by private investors last year. But that was before it disclosed in January that it lost $67 million on $312 million in revenue in the first nine months of 2019, thanks in part to spending $114 million on marketing.
Casper reduced its proposed share price, valuing the company at less than $500 million. It raised $100 million in the offering.
While investors continue to enthusiastically buy shares in the tech industry’s biggest companies, they have been skeptical of young companies that are losing money.
Last year, Uber and Lyft, ride-hailing competitors that are both losing huge amounts of money, had disappointing public offerings. WeWork, the commercial real estate company, dropped its IPO plans and experienced a management shake-up after investors recoiled from its poor financial performance.
In an interview, Philip Krim, chief executive and co-founder of Casper, was still enthusiastic about his company’s first day of trading. “Getting out to public investors has gone great,” he said. “I’ve enjoyed telling people what we’re trying to build and helping people understand it at a level of depth that the headlines might mislead you from.”
Krim said his company’s model of selling goods directly to customers, rather than exclusively through retail chains, is a new concept to public market investors. “Our business is not what investors are used to seeing at this scale,” he said.
Before it went public, Casper had been the toast of the startup world. The company shook up a stodgy mattress industry by selling beds online, delivering them to peoples’ doorsteps in boxes the size of mini fridges.
To lure customers from traditional department stores and mattress chains, Casper advertised heavily on subways, podcasts, television and through quirky marketing campaigns.
“They transformed the way people buy mattresses, sort of forever,” said Ben Lerer, an early investor in Casper through the investment firm Lerer Hippeau. “People didn’t buy mattresses online before Casper existed and now they do.”
Venture investors poured more than $340 million into the company, according to Crunchbase, and Casper began calling itself the “Nike of sleep,” selling pillows, sheets, dog beds and other accessories to what it termed the “sleep economy.”
The company opened 60 of its own stores. In 2017, Casper turned down a $1 billion acquisition offer from Target, which sells Casper products. The chain invested in the company instead.
But as Casper grew, competitors saw an easy opportunity and rushed in, with an average of one new “bed-in-a-box” company launching per week between 2015 and 2018. There are now 175 competitors in the market, according to mattress comparison site GoodBed.