Working to understand the valuation of Rent the Runway’s IPO – TechCrunch
When you drop to go public, you want people to like numbers. You don’t want people to laugh at the numbers.
The most extreme version of this obvious truism was WeWork’s first run in the public markets. He filed, everyone thought his results were ridiculous, and the IPO was eventually pulled. A more modest – but still negative – reaction can be found in Box’s first attempt to go public.
The two companies eventually made their debut, with Box managing to do so through normal methods, while WeWork had to wait for a PSPC to transport it to public markets. And no, I’m not trying to establish any business similarity between Box (software company run by a sane person) and WeWork (non-software company run by someone slightly less trustworthy than Aaron Levie).
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A more recent example of people don’t like numbers very much category is Rent the Runway’s IPO filing. The business – a good business idea that has spawned a large user base over time – isn’t all that great from a business standpoint.
In case you don’t want to read Rent the Runway’s IPO file or our notes on its numbers, the bottom line is that it looks like the depreciation costs related to the clothes Rent the Runway rents out to customers. be high enough to make the company unstable overall company profile.
To combat this appearance, Rent the Runway provided adjusted profitability measures that excluded inventory depreciation. It was not a very popular movement.
Put simply, it seems that Rent the Runway charges too little for its product when you consider all the costs associated with providing its service and running its business.
Regardless of our concerns, however, the company’s first IPO price bracket values the company at over $ 1 billion, so its IPO will be a unicorn start. As such, we have to take it seriously. This morning, let’s quickly calculate its IPO valuation range, its resulting multiples, and compare the company to a related entity to get a feel for what the market is telling us about the fashion rental unicorn.
Prices Rent the track
First of all, a few apologies. As an old-fashioned slacker, I have for too long rejected seemingly investments. Above all, it was my being both a boor and boring, but it was also intellectually lazy.
In reality, humans like to express themselves through clothing, both physical (clothing, makeup, etc.) and virtual (character skins, NFT, etc.). And they will spend to look good.
I would risk that the impulse to look good physically and in digital realms is pretty much related, if not the same. So the beating heart of the League of Legends business model (in-game cosmetics) and Rent the Runway (fashionable clothing rental) should receive similar levels of care.
All of this to say: While we are making critical remarks about certain elements of Rent the Runway’s business results, we do not care what it wants to do or what market demand it strives to meet. Instead, we notice that Rent may be under-invoicing its products, making some numbers a bit wobbly.