Fashion site Rent the Runway raises $ 357 million in large IPO
(Bloomberg) – Rent the Runway Inc. has broadened its initial public offering and priced the shares at the top of a marketed range to raise $ 357 million.
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The company sold 17 million shares on Tuesday for $ 21 each after it marketed 15 million shares for $ 18 to $ 21, according to a statement.
The listing gives Rent the Runway a market value of $ 1.3 billion based on the outstanding shares listed in its filings with the U.S. Securities and Exchange Commission. Considering employee stock options and similar holdings, the company would have a fully diluted value of approximately $ 1.5 billion.
That compares to a valuation of $ 870 million after a funding round that ended in April, according to data provider PitchBook.
The New York-based business struggled to grow during the coronavirus pandemic as lockdowns gave people little reason to dress. The spread of the Covid-19 Delta variant and current work-from-home trends have had minimal impact on its business and financial performance, the company said.
Subscriptions are increasing
Rent the Runway reported a net loss of $ 85 million on $ 80 million in revenue for the six-month period ended July 31. That’s against a loss of $ 88 million on $ 88.5 million in revenue in the same period a year ago.
As the company’s losses continued, the number of its subscriptions grew. Its active subscribers have more than doubled since February 1 to reach nearly 112,000 on September 30, according to the prospectus.
Founded by Jennifer Hyman and Jenny Fleiss, Rent the Runway was one of the pioneers in the retail business of what has come to be called the Rental Company. The company now has more competition in the United States, including from platforms such as Nuuly and Style Lend.
The rental business model of what you wear attracts clients with tighter budgets and keen on access to high fashion than they otherwise could not afford. Richer shoppers also appreciate it because it gives them a wider variety of wardrobes and the opportunity to discover new brands. Services are particularly popular in large cities like New York where storage space is often limited.
Subscribers pay monthly membership fees ranging from a basic $ 89 to $ 199 to rent trendy dresses, accessories and other items for galas, weddings or business events that would cost multiple hundreds of dollars and more to own. Rent the Runway offers hundreds of brands. Buyers can return these items and then order more or they can purchase the products at a lower price than the original price.
More than 80% of Rent the Runway’s revenue comes from subscribers, notes Luca Solca, analyst at Sanford C. Bernstein. While many have remained loyal to the company, some members have suspended their subscriptions.
“Assuming Rent the Runway can continue to grow its (relatively small) subscriber base,” Solca wrote in a research note, “this should in theory allow RTR to leverage its cost base and generate profits in the future “.
The IPO is led by Goldman Sachs Group Inc., Morgan Stanley and Barclays Plc. The shares are expected to start trading Wednesday on the Nasdaq Global Select Market under the symbol RENT.
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