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IPO a No-Go: Volatile Market Leaves Brands Gun Shy

Far from IPO fever, it seems fashion firms are being left out in the cold.

According to experts, clothing brands and retailers aren’t expected to be big players in 2023’s initial public offering market.

That’s no surprise given the tough market conditions. Moreover, the declines in valuation for fashion startups that have gone public could have investors thinking twice about making big bets in the sector.

In the U.S., luxury online consignment retailer The RealReal’s $1.18 stock price gives it a $119.1 million market cap, a 95 percent decline from its $2.39 billion valuation when it IPO’d on June 28, 2019. Warby Parker’s shares are trading at $10.32, giving it a $1.23 billion market cap, or a nearly 80 percent drop from its $6 billion-plus valuation on its Sept. 29, 2021 IPO date. Rent the Runway’s stock price of $1.72 gives it a current valuation of $183.6 million, an 89.2 percent drop from its Oct. 27, 2021 IPO when the company was valued at over $1.7 billion. And one-time Wall Street sneaker darling Allbirds, which recently posted a fourth-quarter net loss of $24.9 million on a 13.4 percent revenue decline, has a share price in the $1.16 range that gives it a market cap of $173.96 million, representing a 91.9 percent decline from $2.15 billion valuation on its Nov. 3, 2021 IPO date.

The December listing of Lanvin Group—the luxury fashion firm that owns Lanvin, St. John, Wolford and Sergio Rossi—via a special purpose acquisition company (SPAC) seems more an aberration than the start of a new market trend, given the paucity of fashion IPOs in 2022. The company reduced its valuation from $1.25 billion to $1 billion in October, a rare move two months ahead of its planned listing. The shares began trading on Dec. 15, with that $1 billion valuation. With shares currently at $5.62, the market cap of Lanvin has already declined 26.4 percent to $736.1 million.

Looking ahead, Chinese fast-fashion retailer Shein is currently raising $2 billion in another round of financing, down from an initial planned raise of up to $3 billion last year. The company is still believed to be targeting an IPO for 2023. A public listing supposedly was planned for last year, but were temporarily shelved after Russia’s invasion of Ukraine. While Plan B is the financing round, speculation continues that an IPO remains on Shein’s agenda after the company named former Bear Stearns investment banker Donald Tang as its executive vice chairman. Whether a 2023 IPO reaches fruition will depend on market conditions. But Shein has other issues it might want to tackle first—environmental critics, U.K. labor violations, and lawsuits in the U.S. alleging design theft and copyright infringement.

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Another fashion firm that could be poised for an IPO this year is the licensed sports merchandise e-tailer Fanatics. While rumblings of an IPO possibility have been circulating since 2021, what gives this company a bit more credibility as a go-to sports platform is its who’s who investor list. That lineup includes professional sports leagues—NFL, MLB, NHL, MLS and NBA—and a number of players’ unions in addition to institutional groups like BlackRock, Fidelity, Blackstone, Silver Lake and SoftBank.

Overseas, Prada SpA last year was thought to be considering a secondary listing in Milan to complement its 2011 Hong Kong Stock Exchange listing, although at the moment that doesn’t appear to be a priority. A December study from Milanese consultancy firm Pambianco Strategie de Impresa suggested that Italian Fashion Group Calzedonia and high-end sneaker brand Golden Goose are IPO possibilities. Italian luxury holding company OTB Group—it owns Diesel, Jill Sander and Maison Margiela, among others—is also on the list, although its chairman Renzo Rossi has pointed to 2024 as a possible listing timeframe.

In Asia, two tech giants are restructuring and have plans to spin off their operating units. Alibaba Group’s decision to break up into six firms potentially could see some of the divisions seek their own public listing at some point down the road. And has decided to spin off its property and industrial subsidiaries, with plans to list them on the Hong Kong Stock Exchange.

In the U.S. IPO market, Renaissance Capital said Monday in a report that the first quarter of 2023 didn’t deviate from 2022, which represented the slowest year in decades. It cited “hawkish signals from the Fed, renewed recession fears, and turmoil within the banking industry” as stumbling blocks.

“Several factors currently cloud our outlook into the second quarter, and the recent volatility will likely sway some companies to push back their offering plans,” the report said.

That already happened in the home and bedding space. Mattress Firm Group Inc. on Jan. 9 filed a request with the U.S. Securities and Exchange Commission to withdraw its planned IPO, citing market volatility. The bedding retailer had confidentially filed for an IPO in September 2021, but didn’t make it public until January 2022. But pulling the IPO could set the stage for a different option for the Mattress Firm. Its parent firm Steinhoff Group last October said that while it continues to monitor market conditions, it would also “explore strategic options for Mattress Firm.”

Renaissance’s report said the first quarter saw 23 companies complete their IPOs, but they only raised $2.2 billion in total and none of the public listings involved fashion firms. While slightly better than the 18 IPOs raising $2.1 billion in the first quarter of 2022, the two comparative quarters are substantially lower than the 101 IPOs that raised $39.2 billion in the first quarter of 2021.