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Casper Sleep Drastically Trims IPO Offering Price

By Asit Sharma – Feb 5, 2020 at 3:20PM

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The adjustment isn't likely to inspire confidence among potential investors.

On Wednesday, Casper Sleep, the online seller of mattresses and sleep accessories, dramatically shaved the amount of money it expects to raise in its upcoming initial public offering.

In an amendment to its "S-1" registration statement filed with the SEC, Casper lowered its offering price to between $12 and $13 per share, from a range of $17-$19 disclosed in its previous filing on Jan. 27. At the midpoint of these respective ranges, the company will haul in about 31% less than it initially expected.

In its filing, Casper notes that after fees associated with the public debut, it expects to raise $92.5 million if its stock prices at $12.50 per share. This amount may rise to $107 million if underwriters exercise their option to purchase additional shares. 

A man inspects a sleep mattress in a store.

Image source: Getty Images.

What this means for investors

In its investment prospectus, Casper bills itself as a fast-growing, tech-savvy omnichannel retailer. Indeed, the company has expanded revenue at a 45% clip over the last two years and boasts impressive stats such as a 20% repeat customer rate -- not bad for the mattress industry.

But with high overhead expenses, Casper currently operates at a loss, booking negative net income of $67 million on $312 million in sales in the first nine months of 2019.

Given an IPO market that's turned more cautious after some high profile stumbles 2019, Casper's red ink is likely a factor behind its wilting offering demand.

The company plans to use its IPO proceeds for "working capital purposes" and to fund growth. But due to its negative margins and trimmed issuance, investors may want to monitor Casper's quarterly results for a while before jumping in. Shares will trade on the NYSE under the symbol "CSPR."

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NYSE owner Intercontinental Exchange. The Motley Fool has a disclosure policy.

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