Rent the Runway’s IPO Prices at High End of Range
Glitzy IPO Draws Investor Interest
Rent the Runway (RENT), the latest direct-to-consumer brand to go public, priced its IPO at the high end of its range Wednesday, giving the company a valuation of around $1.7 billion. Shares of the online merchant, which lets customers rent high-end apparel, began trading at $23 per share yesterday, which was 9% higher than its $21 per share offering price.
Investors clamored to get in on the IPO, prompting Rent the Runway to increase the number of shares it sold from 15 million to 17 million. Shares ended up pricing at the top of the online merchant’s $18 to $21 range. Fundraising from Rent the Runway’s IPO will be used to expand, pursue international growth, and enter new product categories.
Direct-to-Consumer Brands in Vogue
Rent the Runway’s successful IPO comes a few weeks after eyeglass maker Warby Parker (WRBY) launched its own public debut. Warby now has a valuation of $5.5 billion. Meanwhile, organic shoemaker Allbirds is set to go public soon. These companies market their brands and sell their products directly to consumers, although some are eyeing brick-and-mortar locations as well. This string of IPOs is also testing investor interest for big, venture-backed direct-to-consumer brands.
Rent the Runway’s IPO was oversubscribed even though the company was hit hard by the pandemic. There was little need to rent luxury gowns or bags last year with shutdowns in place. In 2020 Rent the Runway posted a loss of $171.1 million. The loss in 2019 was $153.9 million. Active subscribers plummeted to around 55,000 from over 133,000 in 2019 to around 55,000 in 2020.
Rent the Runway on the Mend
To navigate the pandemic, Rent the Runway had to make changes like closing physical stores and overhauling its subscription plans. That meant getting rid of the company’s unlimited plan and reselling its clothes to non-members online. Subscriber levels are increasing now, which the company credits to the return of weddings, birthday parties, fundraisers, and other events which require fancy attire.
Rent the Runway is the latest in a crop of venture-backed direct-to-consumer brands tapping the public markets. With the company’s IPO oversubscribed and shares pricing at the high end of the IPO range, it looks like investors have an appetite for these brands, at least for now.
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