Casper IPO: A Dream Too Good to Be True?

by | Jan 28, 2020 | Editorial, IPO Corner | 0 comments

Hey team, 

Every startup dreams of becoming the next “unicorn,” the coveted $1B market valuation (before IPO). 

In the case of Casper, the trendy mattress company aiming to revolutionize the “sleep economy,” it quite literally dreamed it!

Last March, the company was valued at $1.1 billion and fulfilled CEO Philip Krim’s obsession with achieving that valuation. 

Casper’s private final private funding round in March 2018 pushed the company to that high mark, a rather impressive one for a company that sends you your bed in a cardboard box. 

Investors included celebrities Leonardo DiCaprio and 50 Cent, as well a Target, Lerer Hippeau Ventures, NEA, and IVP.

While the company aims to become the Nike of the mattress industry, analyst skepticism has been growing ahead of the company’s IPO. 

They’re simply suspicious of buzzy startups that remain unprofitable, having seen this scenario play out previously in the past. 

Given these widely-held concerns, the company recently reduced its valuation to less than $1B ($768M on the upper end of the pricing range) — making it no longer a unicorn, but instead an “undercorn.”

Today, I want to walk you through the circumstances surrounding this sudden drop in Casper’s valuation and explain how we can profit from the company during its IPO. 

 

Amid Plummeting Valuation, Casper IPO May Not Be Worthwhile 

 

Casper could very likely join the league of hot tech companies that fail to impress investors during the IPO. 

Much like what happened with unicorns Uber, Lyft, and Peloton, investors may be wary of the company’s yearly losses and preference for rapid growth over profitability.

In 2019, Casper revenues soared in a very short period of time. 

Thanks to an aggressive marketing campaign, they ushered their product into the eyes of many a sleepless consumer. 

In the nine months that concluded on September 30th of this past year, the revenues shot up 20% to $312 million.  

Losses, however, also increased during this time frame, reaching $67 million. 

Now, as the Casper prepares to IPO, it hopes to raise $182.4 million through shareholders. 

The company aims to sell 9.6 million shares, priced between $17 and $19 per share. 

Whether Casper will still IPO given its recent reduced valuation and recent skepticism remains to be seen. 

We saw this exact scenario play out in WeWork when the company canceled it’s IPO as a result of increased scrutiny and dramatically decreased valuation. 

Regardless, let me walk you through how I’m eying up potential profits in the company, assuming it does IPO. 

 

How I’m Preparing For This Massive IPO

 

Casper has already come out with its IPO plan. The company aims to sell 9.6M shares at a pricing range between $17 and $19 per share. That means at the upper end of the range, it would raise $768.2M, well below its $1.1B.

However, that can all change leading up to the IPO.

You see, if there is a heavy demand for the stock, the underwriters could price above the range. So for now, I’ll be waiting to see the night before on how Casper trades.

No, I’m not procrastinating… that’s just when the underwriters price the IPO. So if it prices above the range, that means the IPO could be hot… but if it prices below, that means traders don’t really love it.

If you’re wondering how to trade Casper, then you’ll want to understand the lifecycle of IPOs, and you may want to check out my green, red or yellow light strategy. Click here for all the details.