By Krystal Tse and Jeannette Neumann | Bloomberg
Rent the Runway expanded its initial public offering and priced the stock at the top of the market range to raise $ 357 million.
The company sold 17 million shares for $ 21 each on Tuesday after selling 15 million shares for between $ 18 and $ 21, according to the statement.
According to the listing, Rent the Runway has a market value of $ 1.3 billion based on the outstanding shares listed on its filings with the US Securities and Exchange Commission. Including employee stock options and similar holdings, the company would have a fully diluted value of about $ 1.5 billion.
According to data provider PitchBook, this compares to an estimate of $ 870 million following the completion of the funding round in April.
The New York-based company has struggled to grow in the face of the coronavirus pandemic as the quarantine left people with little reason to dress up. The spread of the Covid-19 Delta variant and the continuing trend towards working from home have had minimal impact on its business and financial performance, the company said.
Subscriptions are growing
Rent the Runway reported a net loss of $ 85 million on revenue of $ 80 million in the six months ended July 31. That’s compared to a $ 88 million loss on $ 88.5 million in revenues in the same period a year ago.
As the company’s losses continued, the number of its subscribers increased. According to the prospectus, the number of active subscribers more than doubled from February 1 to nearly 112,000 as of September 30.
Founded by Jennifer Hyman and Jenny Fleiss, Rent the Runway was among the pioneers of retail in the so-called rental society. However, the company now has more competitors in the US, including from platforms such as Nuuly and Style Lend.
The “rent what you wear” business model attracts customers on a tight budget who are seeking access to high fashion that they would not otherwise be able to afford. More affluent customers also like it because it offers them more wardrobe variety and the opportunity to meet new brands. These services are especially popular in large cities like New York, where pantry is often expensive.
Gala concerts, weddings
Subscribers pay monthly membership dues ranging from $ 89 to $ 199 to rent fashionable dresses, accessories and other items for celebrations, weddings or business events that will cost several hundred dollars or more to own. Rent the Runway offers hundreds of brands. Buyers can return these items and then order more or buy items at a discount from the original price.
More than 80% of Rent the Runway’s revenue comes from subscribers, said Luca Salka, an analyst at Sanford C. Bernstein. While many stayed with the company, some members suspended their subscriptions.
“Assuming Rent the Runway can continue to grow its (relatively small) subscriber base,” Salka writes in a research note, “this should theoretically allow RTR to maximize its cost base and generate profits in the future.”
The IPO is being conducted by Goldman Sachs Group Inc., Morgan Stanley and Barclays Plc. The stock is expected to begin trading Wednesday on the Nasdaq Global Select Market under the symbol RENT.