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Feb. 7, 2020, 7:37 a.m. EST

Casper Sleep stock climbs more than 20% in trading debut after it reins in expectations

Casper lowered the price range and then priced its deal at the low end to raise less at a smaller valuation than originally planned

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By Ciara Linnane, MarketWatch


Getty Images
Casper is credited with popularizing the bed-in-a-box craze.

Casper Sleep Inc., the startup that popularized the bed-in-a-box trend, saw its shares rise more than 20% in their trading debut Thursday, after underwriters priced its initial public offering at $12, the lower end of a reduced range.

That left the company’s valuation at less than half the $1 billion needed for it to be a true unicorn, the Silicon Valley term for a company valued at that level.

The New York-based company sold 8.4 million shares to raise $101 million. Just hours before the pricing, it cut the range to $12 to $13 a share, from a prior range of $17 to $19 a share.

With 39 million shares outstanding, the $12 pricing values the company at about $468 million, below the $741 million implied by the previous price range and well below the $1.1 billion it garnered in its last private funding round last March. The New York Post reported recently that Chief Executive Philip Krim, a co-founder, was determined to achieve a $1 billion valuation in the IPO, suggesting investors had pushed back.

Casper is trading on the New York Stock Exchange under the ticker symbol “CSPR.” The company had to persuade investors that it is not like the other loss-making IPOs of 2019, such as Uber /zigman2/quotes/211348248/composite UBER -1.07% Lyft /zigman2/quotes/208999293/composite LYFT -4.98% and WeWork, the office-sharing company that saw its IPO plan collapse after its filing revealed shaky underlying financials.

Casper /zigman2/quotes/216229741/lastsale CSPR -3.57% which was founded in 2014 with a foam mattress as its only product, addressed that challenge in an IPO prospectus that framed its business as the third cog in the global wellness trend, alongside nutrition and fitness.

Its stated mission is no less elevated than “to awaken the potential of a well-rested world” and be part of a “sleep economy” worth about $432 billion worldwide and $79 billion in the U.S. alone. Those figures come courtesy of an analysis conducted by Frost & Sullivan, which Casper commissioned in 2019.

Proceeds of the deal are to be used to repay debt, fund growth and for general corporate purposes, according to a filing document.

Read: IPO market has begun pushing back on growth-at-all-costs private companies

Casper started life with a direct-to-consumer product, cutting out the middlemen that make mattress buying expensive. Customers could order online and have a mattress delivered in a box, and once the box was opened and the mattress unpacked, the mattress would unfold and take the shape of a more traditional mattress.

The company has invested heavily in digital marketing and other promotional activities — it spent a full $422.8 million on marketing initiatives in the period stretching from 2016 to September of 2018, according to its prospectus, tapping into heightened awareness of the importance of sleep, as touted by celebrities like Arianna Huffington.

See also: Arianna Huffington: ‘I’m a risk-taker in every part of my life — except my finances’

It has expanded its product portfolio over time, adding a range of mattresses at different price points, along with pillows, duvets, sheets, bedroom furniture and accessories such as noise machines, medical trackers and lighting devices.

Its Casper Labs R&D facility in San Francisco develops and tests new technology, according to the prospectus. And while its business model is heavily skewed toward direct-to-consumer sales, it operates 60 retail stores in the U.S. and Canada, and has 18 retail partners, including e-tail juggernaut Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.70% , the membership warehouse chain Costco /zigman2/quotes/201191698/composite COST +0.03% , department-store operator Hudson’s Bay Co. /zigman2/quotes/208707599/delayed CA:HBC 0.00% and big-box store chain Target Corp. /zigman2/quotes/207799045/composite TGT -1.39% , which in 2017 invested a reported $75 million in the mattress startup.

See: Do you sleep a ‘normal’ amount? This chart reveals how much shut-eye we really get

Click to Play

In the Elevator With Casper's CEO

WSJ's Joanna Stern "bumps" into Philip Krim in the elevator at D.Live and asks about Casper's possible IPO, and pitches a mattress idea of her own. Photo: Andria Chamberlin for The Wall Street Journal

Here are 3 things to know about Casper:

It’s the sleep economy, stupid

Casper makes much of the “sleep economy” in a pun-dense prospectus, forecasting a similar transformation for the concept of sleep as has occurred in fitness and nutrition. The company describes a “sleep arc” that spans bedtime to wake-up time and is ripe for products that address light, sound, temperature, ambience and humidity, among other factors.

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US : U.S.: NYSE
$ 39.66
-0.43 -1.07%
Volume: 32.01M
Feb. 14, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$68.08 billion
Rev. per Employee
N/A
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/zigman2/quotes/208999293/composite
US : U.S.: Nasdaq
$ 44.69
-2.34 -4.98%
Volume: 21.57M
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$13.52 billion
Rev. per Employee
$450,139
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/zigman2/quotes/216229741/lastsale
US : U.S.: NYSE
$ 10.26
-0.38 -3.57%
Volume: 895,167
Feb. 14, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$407.04 million
Rev. per Employee
N/A
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/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 2,134.87
-15.00 -0.70%
Volume: 2.61M
Feb. 14, 2020 4:00p
P/E Ratio
92.75
Dividend Yield
N/A
Market Cap
$1062.76 billion
Rev. per Employee
$359,671
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/zigman2/quotes/201191698/composite
US : U.S.: Nasdaq
$ 318.31
+0.11 +0.03%
Volume: 1.11M
Feb. 14, 2020 4:00p
P/E Ratio
37.73
Dividend Yield
0.82%
Market Cap
$140.62 billion
Rev. per Employee
$600,967
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/zigman2/quotes/208707599/delayed
CA : Canada: Toronto
$ 10.94
0.00 0.00%
Volume: 633,490
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.46%
Market Cap
$2.02 billion
Rev. per Employee
$183,788
loading...
/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 116.63
-1.65 -1.39%
Volume: 3.29M
Feb. 14, 2020 6:30p
P/E Ratio
18.63
Dividend Yield
2.26%
Market Cap
$59.10 billion
Rev. per Employee
$209,322
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