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Allbirds Files IPO With A Sustainability-Themed Twist

After months of speculation, Allbirds is officially filing for an IPO.

The lifestyle brand, which gained popularity due to its sustainable footwear made from products like merino wool, sugarcanes and eucalyptus trees, registered an S-1 filing with the U.S. Securities and Exchange Commission (SEC).

Sustainability has been a central theme of Allbirds as part of its growth, so it is only fitting that the B Corporation is even branding its IPO as such. The company referred to the offering as a “Sustainable Public Equity Offering,” or SPO, which it said could be used as a framework for other companies to emulate.

This framework establishes pre-defined criteria that an independent third party would be able to assess when sustainable brands want to go public. The criteria includes a minimum environmental, social and governance (ESG) rating; a stakeholder-centric mission and purpose; best practices on climate responses, value chain, people management and corporate governance; transparent reporting of ESG practices and matters; and commitments to make meaningful progress on important ESG matters.

Representatives of Allbirds created the criteria, in conjunction with an advisory council hosted by The Business Roundtable, an unnamed company stockholder and several cross-sector thought-leaders, market participants, and stakeholders from the private and public sectors.

The SPO creation comes as more investors are taking ESG into account when backing companies as consumers continue to demand sustainable products amid growing concerns of climate change.

Allbirds has been putting its money where its mouth is, saying that an average pair of its shoes carries a carbon footprint that is approximately 30 percent less than the estimated carbon footprint for a standard pair of sneakers, due to its use of renewable, natural materials and responsible manufacturing.

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But the digital native is looking beyond that, establishing a target to reduce per unit carbon footprint 95 percent by 2030, relative to a baseline of what its average carbon emissions would be per unit in 2025 without any further action to limit emissions. This is equivalent to a 44 percent reduction in its absolute carbon footprint against a 2020 baseline.

Allbirds intends to list its Class A common stock on the Nasdaq Global Select Market under the ticker symbol “BIRD.”

The San Francisco-based fan favorite recently opened its 30th store in Atlanta, and has gathered a following that tends to buy more once they stick.

The average spend by a repeat customer in a given cohort is more than 25 percent more in their second year as compared to year one, and the average spend by a repeat customer continues to increase each subsequent year.

Of the U.S. customers acquired between 2016 and 2019, approximately 43 percent returned for a second purchase by Dec. 31, 2020. After a second purchase, 50 percent of those customers purchased again, and after a third purchase, 55 percent of those customers purchased again.

Shoppers who have shopped with Allbirds at least once a year are profitable within one month of purchase, the brand said. Additionally, inventory can go from purchase order to ex-factory in as little as 45 days.

For the first six months of 2021, net revenue increased to $117.5 million, or 26.7 percent year over year, above the $92.8 million taken in during the 2020 period. Gross margin also jumped 2.3 percentage points to 54.4 percent of sales, primarily due to favorable product mix and improved product margins and partially offset by higher logistics costs.

In 2020, net revenue for Allbirds was $219.3 million, 13.2 percent ahead of 2019 totals, primarily driven by increases in average order value (AOV) and number of online orders. Gross margin improved by 0.3 percentage points to 51.4 percent.

As is the case with many digital natives that have scaled their retail business in recent years, Allbirds now has to figure out how to slow its growing losses.

Allbirds accumulated $21.1 million in net losses for the first six months of 2021, doubling the $9.5 million net loss of the 2020 first half. In total, Allbirds saw $25.9 million in net losses during 2020.

However, the DTC darling did improve adjusted EBITDA by approximately $500,000 thus far in 2021, improving the adjusted losses to $5.7 million from $6.2 million in 2020. Higher gross profit largely drove the increase, which was partially offset by higher operating expenses.

As of June 30, 2021, Allbirds had cash and cash equivalents of $94.9 million, with its operations previously having been funded primarily through cash flows from product sales and net proceeds from private sales of equity securities.

The company has no existing balances on the credit agreement it entered in February 2019, and has a revolving line of credit of up to $40 million and an optional expansion of up to $35 million.

Morgan Stanley, J.P. Morgan, and BofA Securities will act as lead bookrunning managers for the proposed offering. Baird, Piper Sandler, William Blair, Cowen, Guggenheim Securities, KeyBanc Capital Markets, Stifel, Telsey Advisory Group, C.L. King & Associates, Drexel Hamilton, Loop Capital, Penserra Securities LLC, Ramirez & Co., Inc., and Siebert Williams Shank will act as co-managers.