By Nathan Vardi
A year ago, Heather Hasson and Catherine “Trina” Spear traveled from Santa Monica, Calif., to New York to ring the opening bell at the New York Stock Exchange. The co–chief executives of FIGS, an online retailer of higher-end apparel for healthcare professionals, cheered their initial public offering together with people who joined them on the bell podium wearing stylish scrubs.
FIGS had capitalized on some powerful pandemic-era trends, and, in the IPO, its shares were sold at $22 apiece, raising $580 million. The FIGS IPO even tapped the retail market, becoming the first IPO that was made available to users of the Robinhood trading app.
Most of the IPO money raised, however, didn’t go to the company. Instead, $450 million of the proceeds went to Tulco Holdings, a company controlled and run by Thomas Tull, the Hollywood movie-studio billionaire. Tull’s holding company had invested some $65 million in FIGS /zigman2/quotes/203784030/composite FIGS +0.85% over the preceding four years and become its biggest shareholder, securities filings show.
“The healthcare apparel market is massive. It’s a $12 billion market in the United States. It’s $79 billion globally,” Spear said on the day of the IPO from the floor of the New York Stock Exchange. “We actually feel those numbers are a bit understated.”
With fashionable face masks and a direct-to-consumer online model that had become popular with investors, shares of FIGS quickly soared to $50. Four months after the IPO, in September 2021, FIGS announced a secondary offering at $40.25 per share.
This time Hasson, 40, and Spear, 38, got in on the action. Hasson sold $94 million in FIGS shares in the secondary offering, and Spear sold $59 million, securities filings show. Tull’s company also sold another chunk of FIGS shares in the secondary offering. In total, Tull’s company has sold $822 million of shares since the IPO, according to an analysis of securities filings conducted by research and analytics firm VerityData.
But this year investors have started to question the FIGS growth story and the general euphoria around new direct-to-consumer models. Wall Street analysts have become skeptical that the total addressable market for stylish scrubs is as large as Spear had asserted. Investment bank Cowen, for example, put out a note saying that the market is much more difficult to pin down and that employment growth among healthcare workers appears to be slowing.
Shares of FIGS have plummeted. The stock recently traded hands for $10.16, down 54% since its 2021 IPO and 75% since FIGS’s secondary offering. Anybody who bought and held the $975 million in shares sold by Tull’s company, Hasson and Spear is sitting on massive losses. The entire company was recently valued at $1.7 billion.
“After building the company and growing its value for over a decade, FIGS co-founders Heather Hasson and Trina Spear sold a small percentage of their overall holdings in the same timeframe and amounts that any FIGS shareholder was allowed to sell under the IPO’s lockup terms,” FIGS said in a statement. “While macro conditions later impacted the overall stock market, Heather and Trina continue to be more invested than anyone in FIGS’ long-term success as two of the company’s largest shareholders.”
Tull declined to comment.
With the stock market surging, 2021 brought an IPO bonanza. Through traditional IPOs, direct listings and special-purpose acquisition companies, or SPACs, more companies were listed on U.S. stock exchanges in 2021 than in any single year ever. Dealogic said more than 1,000 new companies listed their shares on U.S. exchanges and raised $315 billion. Wall Street investment bankers pushed every company they could find onto the public markets, taking in $10 billion in fees for their efforts . Goldman Sachs /zigman2/quotes/209237603/composite GS -1.53% , JPMorgan Chase & Co. /zigman2/quotes/205971034/composite JPM -0.99% and Morgan Stanley /zigman2/quotes/209104354/composite MS -1.58% each booked more than $1 billion in IPO revenue.
Today, many of the companies that were listed in the stock market last year are trading well below their IPO prices. But while investors lost money, many insiders — CEOs, executives, venture capitalists and other early financial backers — were able to cash out significant sums.
There have been some big sellers. Dating-app operator Bumble /zigman2/quotes/224422770/composite BMBL -0.53% raised $2.4 billion in its initial public offering last year by selling shares for $43 apiece. Most of that money went to the company’s major shareholder, Wall Street behemoth Blackstone Group, which has sold $2.19 billion of Bumble’s stock, securities filings show. Bumble’s shares now trade for around $27, down 37% since the IPO. Blackstone /zigman2/quotes/203156858/composite BX +0.70% declined to comment.
In total, insiders have sold $35.5 billion in shares of companies that went public in 2021 in the U.S., according to VerityData. Some insiders did buy, but they have only purchased an aggregate $7.6 billion in publicly traded stock of companies that listed on U.S. exchanges last year. For example, Tull recently purchased $7.25 million in FIGS stock.
“When the market is hot you tend to get companies trying to take advantage of the frothy market for new offerings, and you saw that with the IPOs and SPACs of 2021,” says Ben Silverman, director of research at VerityData.
Coinbase, Coupang, Playtika, Robinhood, Honest Co.
In April 2021, Coinbase, operator of the nation’s biggest cryptocurrency exchange, listed its shares on Nasdaq through a direct listing, circumventing the traditional IPO process that features expensive investment-banking fees. “I was excited about the direct listing,” Coinbase /zigman2/quotes/225893452/composite COIN -1.73% CEO Brian Armstrong said at the time . “I felt like it was more true to the ethos of crypto.”