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13th May 2022

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Honest IPO, Jessica Alba’s Beauty Company On Wall Street

Jessica Alba’s The Honest Co. has landed on Wall Street.

Shares of the clean beauty pioneer shot up 43.3 percent to $22.93 after the company’s initial public offering on Wednesday.

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That initial price bump in early Nasdaq trading valued the company at $2.1 billion. Now Honest’s market capitalization — the combined value of all of its stock — will float second-by-second as investors make their bets on the future of the company, which is looking to grow through new products, and internationally.

Last year, international sales represented just 2 percent of Honest’s $300.5 million in revenues and the company noted many of Alba’s 39 million social media followers are outside of the U.S., providing a base for expansion.

After the IPO, the company has some more cash — and a new type of liquid currency with its stock — to fuel that growth and more to profitability (net losses narrowed to $14.5 million last year from $31.1 million in 2019 as gross margins increased 370 basis points).

Honest is just the latest company to jump into what has been an outrageously hot stock market, despite the economic pain of the pandemic, by low interest rates, online buying and government stimulus. Dr. Martens, MyTheresa, Poshmark and ThredUp have also taken advantage with offerings of their own while others, such as Warby Parker and Allbirds, are rumored to be weighing their options.

IPO’s are a two-step process with the company and its backers selling stock to large institutional investors at a set price — Honest’s offering priced at $16 a share, the midpoint of its projected range. And then those investors turn around and sell the shares on the open market.

In the offering, Honest sold 6.5 million shares, raising $103.2 million to put to general corporate purposes. But it was private equity firm L Catterton that supplied most of the stock for the IPO, selling 15.5 million shares for $247.2 million.

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That makes a good turn for L Catterton, which dubs itself the world’s largest consumer-focused fund and has built a large portfolio of fashion-related companies, most recently adding Birkenstock. L Catterton invested $200 million in Honest in 2018 — meaning it has already more than made its money back and still holds 15.7 million shares, currently valued at $360.9 million.

Alba, who founded the company in 2011 and serves as chief creative officer and chair, held on to her 5.6 million shares, which are now valued at $129.4 million.

The firm Alba founded has grown to 191 employees, including chief executive officer Nick Vlahos, but she is still the central figure, bringing both her creative chops and her celebrity into the mix.

In its registration statement for the IPO, Honest described Alba as “a globally recognized Latina business leader, entrepreneur, advocate, actress and New York Times bestselling author.”

In addition to serving as an executive, Alba appears in Honest’s marketing and also has a “likeness agreement” with the company that she is able to drop with prior written notice.

“We believe that the success of our brand depends in part on our ongoing affiliation with Jessica Alba,” Honest said.

And now, that success will be tracked constantly by investors and analysts the world over.

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2021-05-05 16:39:12

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