Early Casper investors likely to bear the biggest losses ahead of this week’s IPO

Early Casper investors likely to bear the biggest losses ahead of this week’s IPO

  • Casper decision to slash its initial valuation could hurt some of its early investors.
  • Casper prices its shares between $17 and $19, providing it with a midpoint valuation of about $705 million.
  • Pricing the shares at a midpoint of $17 and $19 will result in a 37% drop on its 2017 valuation when Target and other investors joined Casper’s Series C fundraising.
  • The company’s 2014 Series A funding valued its shares at $2.70, any investor who came in at the time will be reaping total gains of about 553% at the IPO’s mid-range price. But the Series B funding valued its shares at $23.12, and investors that came in during and after that round will be sitting on a paper loss.

American retail giant’s investment in Casper could be slashed significantly after the mattress company reworked its initial valuation downwards.

Casper, which brands itself as a market leader in the “sleep economy”, deals not just in mattresses but also sheets, pillows, lamps, plus several other bedroom necessities. The company announced it would be settling for a lower valuation in a move that will see the retailer operate below its venture capital fundraising standards.

As has been reported, Casper prices its shares between $17 and $19, providing it with a midpoint valuation of about $705 million. The upper limit valuation will be $744 million while the lower estimate would amount to $666.4 million, evaluated from 39.3 million outstanding shares after the listing, according to its filing at the Securities and Exchange Commission (SEC) Monday (Jan. 27).

Now, pricing the shares at a midpoint of $17 and $19 will result in a 37% drop on its 2017 valuation when Target and other investors joined Casper’s Series C fundraising. According to IPO research organisation Renaissance Capital, Target controls an $80 million equity stake in the company.

Last year in March, Casper conducted a Series D fundraising that placed its valuation at $1.1 billion.

One of Renaissance Capital’s chief analysts Matthew Kennedy stated that Target would bear the most significant loss, adding that it wouldn’t be the only “big loser”. Casper had long been overvalued, as far as during its Series B round of funding, Kennedy said.

When contacted by CNBC, neither Target nor Casper would comment on the matter.

Target was reportedly interested in acquiring Casper for a billion dollars before taking part in the fundraising. While most analysts may not realise the full benefit of Target’s arrangement, some would argue the firm’s placement in Casper is strategic.

“These investors are faring better than SoftBank did on WeWork, but that is not a high bar. If you had invested in the Nasdaq five years ago, you’d have a +90% return, so compare that to the Series B investors’ 19% loss.

“You never go in wanting to lose money,” Kennedy said.

Casper’s 2014 Series A funding valued its shares at $2.70, any investor who came in at the time will be reaping total gains of about 553% at the IPO’s mid-range price. But the Series B funding valued its shares at $23.12, and investors that came in during and after that round will be sitting on a paper loss.  

By Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment news sites. I mix my passion for the industry and journalism to bring my readers informative and trustworthy articles.

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