Investor skepticism toward fast-growing, unprofitable startups has claimed a new victim.

Casper has taken one of the largest IPO haircuts of the last 20 years, recording a 56% drop in valuation from its most recent VC funding round. The direct-to-consumer mattress and bedding startup priced its shares at $12 apiece Wednesday, valuing the company at $475.6 million. Just a year ago, it had convinced private investors it was worth $1.09 billion, according to PitchBook data. 

That decline was the 12th-largest IPO haircut since the year 2000—although not on the same scale as Square's record-setting $3.08 billion drop in 2015. 

Notable IPO haircuts 

 

A regulatory filing earlier in the day indicated that existing investors NEA and IVP were interested in buying up to $20 million worth of shares, around a fifth of the offering. It was a sign that some of the people most familiar with the company think it's worth more than the current price implies.

Most companies see their valuations grow when they go public, although the size of the typical IPO step-up has shrunk in recent years. In the first half of 2019, the median valuation step-up multiple for venture-backed startups at IPO was 1.1x, according to our most recent VC Valuations Report.

One thing that has weighed on Casper's ambitions is the sheer volume of competitors. There are about 175 direct-to-consumer online mattress brands, according to Mike Magnuson, founder of mattress review site GoodBed.com. 

Public markets proved rocky for loss-making companies throughout 2019. Firms like Uber and Slack saw their stock prices fall after going public, and WeWork's IPO fell to pieces under public scrutiny.

Casper will begin trading on the NYSE under the symbol CSPR on Thursday. The underwriters include Morgan Stanley, Goldman Sachs and Jefferies.

Featured image courtesy of Capser

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