Online fashion retailer Revolve Group has successfully completed its initial public offering, paving the way for a warm reception for other consumer-facing companies pushing forward on plans while the window to go public still remains open.
Revolve, which caters to the millennial and Gen Z male and female cohorts, on Thursday night priced its shares at $18 each, the high end of its projected $16 to $18 range. That allowed the e-tailer to raise $212 million as shares began trading Friday at $25.16 and rising as high as $35 in intraday trading, or 94 percent above their IPO price. The shares closed Friday at $34.00.
The news could mean a positive reception for The RealReal’s IPO expected later this year.
Not all companies that make it to the public markets have done well. In the on-demand transportation sector, Uber Technologies floated its shares on May 10 at $42, closing just under that at $41.57. It was enough to capture an initial market capitalization of about $70 billion, just $2 billion shy of where venture capitalists had pegged its market cap ahead the IPO. But it wasn’t until June that shares began trading above the $40 to $43 range. At publication time, Uber shares were trading at $44.16.
Uber’s IPO wasn’t exactly a bust, and it was better than its ride-sharing competitor Lyft Inc. Lyft shares floated on March 29, hitting a market cap of about $90 billion, but the shares started to decline in the weeks following its IPO. Lyft shares began trading at $87.33 on its first day as a public company, but closed below that at $78.29. On Friday, Lyft shares closed at $59.26.
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In the world of fashion IPOs this year, shares of Levi Strauss & Co.–which raised $623.3 million–closed at $22.41 on its first day of trading on March 21, 19 cents above the opening price when it began trading. Since then, it has been holding steady at the $22 to $23 range, reaching as high as $24.50 in mid-April. Shares closed on Friday at $20.98. And Kontoor Brands Inc., the spin-off by VF Corp. of its jeans business, began trading at $38.40 on May 24, closing at $36.40. On Friday, the shares closed at $28.42.
Fashion and retail stocks in recent weeks have seen a bit of volatility as investors tried to gauge what impact they would see from the Trump administration’s planned tariff hikes. Revolve’s success could be a good proxy for what’s to come next, the planned IPO of luxury consignment market platform The RealReal.
According to Matthew Kennedy, senior IPO market strategist for Renaissance Capital, a provider of IPO exchange-traded funds, Revolve’s close of up more than 80 percent from its opening trade is “not a perfect comp to The RealReal, [but is] a positive sign nonetheless.”
Kennedy sees a “robust pipeline over the summer,” although the dominant players are firms in biotech and health care. Pet parent e-commerce site Chewy is set to float next week, along with cybersecurity start-up unicorn Crowdstrike. They are expected to be followed by a group of other so-called unicorns: indoor-cycling start-up Peloton; workplace communications tool Slack; co-working office space firm WeWork, which was recently rebranded to The We Company, and same-day delivery firm Postmates. Others on the watch list that could head to the public markets this year or next include big data analytics firm Palantir; hospitality start-up Airbnb, and direct-to-consumer mattress firm Casper.
And there’s been speculation about what Rent the Runway might do, given the amounts it has raised. The company in March hit unicorn status with a $1 billion valuation after its most recent $125 million funding round. The firm has raised an aggregate of $337 million in equity, plus the $200 million credit facility it got in August 2018. And elsewhere on the fashion front, J.Crew Group continues to mull over whether it should take its Madewell concept public, while Gap Inc. is already planning a spin-off of its Old Navy division.
There’s also been speculation about the IPO window possibly closing at some point later this year or next, if there are any signs of deterioration in the U.S. economy. There’s no indication of either happening yet, though concerns about a slowing U.S. economy are in the air.
And according to Kennedy, “The IPO window can close quickly. If a company can go public, and has the financials, 2019 is a good year to go public. Who knows where the market will be next year.”
That said, he noted that Renaissance believes there’s a bit of a “bubble in the private market as valuations have gotten out of control. We’re seen some down rounds, and companies have been able to tap the private markets which allows them to stay private.”
Still, continued market volatility may also push more firms forward to the public markets, he said.