Casper, the sleep unicorn, files for IPO

Wake up everyone, Casper Sleep just filed to go public.

The self-described “pioneer of the Sleep Economy” has enlisted Morgan Stanley, Goldman Sachs and a slew of other banks to market its initial public offering, according to a filing issued Friday afternoon. But it could be a heavy lift for the mattress firm to get a deal done at a good price because Casper, like many other unicorns, is deeply unprofitable and growth is slowing.

The company posted a $67.3 million net loss through the first nine months of last year, compared to a $65.5 million loss in the year-earlier period. Casper’s revenue rose by 20% to $312 million through Sept. 30, 2019, but between 2017 and 2018 revenue growth was twice as high. The company burned through $30 million of cash over the first three quarters last year, $15 million less than it did in the prior year period.

Casper demonstrated that consumers were willing to buy mattresses they’d never lain in, never mind checked out in person. The investment bank Wedbush estimated that online retailers have captured 20% of the $16 billion mattress market and 35% is possible. It’s thought that 175 online mattress retailers launched in Casper’s wake.

In a letter included in the prospectus, CEO Philip Krim laid out how he got into this sleepy business.

“Five years ago, my co-founders and I were aspiring entrepreneurs, increasingly busy with our lives, trying to improve our personal health and wellness—but, too often, sacrificing sleep to make it all work,” he wrote. “And we realized that when we slept better, we felt better, and performed better.”

Selling a mattress in a box comes with the risk consumers won’t like what they bought and Casper said about a quarter of all mattress sales are returned, refunded or discounted. The retailer also spends heavily to reach new customers, with marketing costs eating up more than a third of net revenue. 

SOURCE: Section Page News – Crain’s New York Business – Read entire story here.