The red-hot IPO market could soon have several new entrants.
So far in 2021, Poshmark, Mytheresa.com, Dr. Martens, and ThredUp all brought their fashion propositions to the public markets, with self-driving tech firm TuSimple raising $1.35 billion in its debut and medical scrubs startup Figs also joining the IPO party.
Authentic Brands Group
Founding CEO Jamie Salter declined to comment on ABG’s IPO plans but has eyed a public debut since around 2015. When Salter created ABG in 2010, private equity firm Leonard Green & Partners was the main investor and the firm generated about $4.5 billion in sales by 2015. Since then, Lion Capital took a 20 percent minority stake in 2016, followed by General Atlantic’s investment in 2017 and BlackRock’s $875 million majority stake in 2019—giving ABG the firepower to pursue billion-dollar deals.
And the brand management giant has put those funds to good use, padding its portfolio with bankrupt nameplates including Barneys New York, Brooks Brothers and Lucky Brand. Rescued from a trio of Chapter 11 petitions, the labels join a stable of household-name brands including Aéropostale, Jones New York, Nine West, Vince Camuto, Juicy Couture and Nautica, in addition to Hart Schaffner Marx, Herve Leger, Hickey Freeman, Muhammad Ali, Thomasville and Sports Illustrated. Eddie Bauer is slated to come aboard in a matter of weeks via Sparc, the joint venture with Simon Property Group that has greased the wheels of numerous ABG deals.
Salter has been vocal about his ambitions to grow ABG to $25 billion in the coming years, up from $15 billion today. Forty percent of its business is from international operations.
Bloomberg reported that ABG was planning for an IPO later this year, eyeing a $10 billion valuation. The firm has already started the process through a confidential prospectus filing with the Securities and Exchange Commission, WWD reported.
Chinese fast fashion e-tailer Shein, pay-later platform Afterpay, footwear brand Allbirds, and Roger Federer backed running shoes startup On Running are also said to be eyeing the public markets. Saks, whose dot.com operations became a standalone firm following the split from its brick-and-mortar counterpart, is said to be interested in an IPO as well.
Shein is believed to be looking at the U.S. equity market for its listing. Founded in October 2008, the company targets the European, American, Australian and Middle Eastern markets, and relies heavily on a community of micro-influencers to reach trend-conscious consumers through social platforms. In January, Shein was an early frontrunner for bankrupt Arcadia’s Topshop and Topman brands, said to offer about $409.7 million after Next plc backed out. Asos eventually acquired the pair’s brand assets and inventory for $363.2 million, casting its cost-intensive stores by the wayside.
While Shein primarily focuses on women’s fashion, it also sells apparel, accessories and footwear for men and kids, leaning on in-house production, manufacturing, owned fulfillment warehouses. Existing investors Sequoia Capital China and Tiger Global Management did not return a request for comment by press time.
Why an IPO?
According to Renaissance Capital, more than 150 initial public offerings have priced so far this year.
To get a sense of the demand, Oprah Winfrey-backed plant-based dairy startup Oatley Group AB priced at $17 a share, the top of its range, while Jessica Alba-backed consumer goods newcomer Honest Company priced at the upper half of its expected range at $16 a share.
But not all IPOs maintain their opening-day high. Honest Co. opened at $21.22 in its first trading session on May 5 after listing at $16, and crested $23.88 the same day. Six days later, the shares slipped below its original pricing, and dipped to $14.70 before rebounding to $16.57 on Tuesday morning.
More recently, JD.com spun out its logistics arm on Friday. Shares of JD Logistics Inc. priced at 40.36 in Hong Kong dollars ($5.20) on the Hong Kong Stock Exchange, and rose as high as 47.75 Hong Kong dollars ($6.15), before giving up those gains to close at 41.70 Hong Kong dollars ($5.37).
The same is true of Figs, which priced at $22 on Wednesday, well above the expected $16 to $19 range. Shares began trading at $28.30 on Thursday, and closed at $30.02. Friday saw the shares trading in the range of $33, giving the medical scrubs startup a market capitalization of $5.33 billion. Shares are trading at $31.48 Tuesday morning.
In contrast, the Shopify-backed Global-E Online seems to be one of the luckier one holding onto early gains. The company on May 11 priced its shares at $25, on the eve of its first day of trading, giving the Israeli-based firm a valuation in the $3.6 billion range. Shares of the cross-border e-commerce platform has since risen higher, trading at the $32 range for a market cap of $4.55 billion.
Proceeds from an IPO be reinvested future growth, earmarked for general corporate purposes, and returned to investors—usually private equity and venture capital for start-ups—that sell shares as part of their exit strategy.
IPOs can yield heady valuations. Honest Co.’s IPO raised $413 million, and the shares’ close at $23 on its first day of trading gave the company a valuation of $2.68 billion. JD Logistics raised $3.2 billion in its IPO, giving the delivery and warehousing firm a valuation of $36 billion.
In other sectors, Krispy Kreme filed confidentially, and could become the first restaurant IPO since 2019. Sweetgreen, the salad chain, is said to be mulling a debut later this year.
What about SPACS?
The SPAC, or special purpose acquisition company, has also gained popularity this year, attracting interest from fashion and retail. Known as “blank check companies,” SPACs essentially raise money through an IPO, then goes hunting for a company to buy, and runs the risk of having to repay investors can’t finalize a purchase within 18 to 24 months.
Of note, SPACs take less time to put together versus a traditional IPO, which usually needs about six months to gather and finalize all the requisite documentation, on top of the customary investor roadshow.
SPACs have landed on lawmakers’ radars. The U.S. House Committee on Financial Services on May 24 held a hearing on investor protection concerns, led by the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, and chaired by Rep. Brad Sherman (D-Calif.).