Allbirds IPO: Pricing Above Range Signals DTC Success

Recent IPO Trends and Allbirds' Public Offering

Despite recent, less-than-stellar earnings reports from Robinhood following its initial public offering (IPO), the market for public offerings hasn't diminished.

Allbirds, a direct-to-consumer footwear company with substantial private investment, successfully priced its IPO last night at $15 per share. This represents a $1 increase above the anticipated price range.

The company also increased the number of shares available in the offering by a million, further bolstering its overall value and contributing to the optimistic sentiment surrounding its debut.

Valuation of Tech-Enabled Unicorns

This development revisits our discussion concerning the valuation of technology-driven, privately-held companies – often referred to as unicorns – as they seek capital through public markets.

It’s worth remembering that when Rent the Runway launched its IPO, its valuation was “slightly above 7x its revenue run rate as of July 31, 2021 (calculated by multiplying quarterly revenue by four).”

While the company’s stock price has subsequently decreased from $21 to approximately $16, this post-IPO performance isn’t our primary focus; we are analyzing initial pricing.

Allbirds' Valuation Multiple

Previously, we observed that, at a share price of $14 and the initially projected share count, Allbirds would have been valued at just under 9x its current annual run rate on a fully diluted basis.

With the $15 per share price and the addition of a million shares, Allbirds is now valued in the mid-9x range of its current run rate, depending on the precise share calculation.

(Please note that this is preliminary data, so minor discrepancies in calculations are to be expected.)

Implications for Future IPOs

The pricing of Allbirds’ IPO supports our broader assessment that tech-enabled unicorns pursuing public offerings can anticipate a revenue multiple in the upper-single-digit range. This is contingent on their ability to effectively present their case to public market investors.

Key takeaway: A compelling narrative and strong financial presentation are crucial for achieving a favorable valuation during an IPO.

The IPO Valuation Landscape

While the initial outlook was optimistic, the performance of companies like Rent the Runway post-IPO introduces a degree of uncertainty. Should Allbirds experience a similar downturn, the implications for future valuations will be significant.

Currently, Rent the Runway’s revenue multiple is decreasing, having already fallen almost 24% from its initial public offering price. A comparable decline for Allbirds following its market debut today could necessitate a revision of our expected valuation range.

Impact on Sweetgreen's Potential Valuation

A downward adjustment of the valuation bracket from 7x-9x to 5x-8x would be unfavorable for private companies considering an IPO. This situation directly affects expectations surrounding Sweetgreen, another technology-driven business preparing for a public listing.

Sweetgreen recently reported revenues of $95.84 million for its latest quarter. Applying a 7x multiple to this annualized revenue suggests a potential valuation of approximately $2.7 billion.

Valuation Scenarios

• Applying the lower end of a revised range (5x) would result in a valuation of $1.92 billion.

Both of these figures exceed Sweetgreen’s valuation from its 2019 Series I funding round, as reported by Crunchbase, indicating a potential gain.

The Role of Market Performance

Rent the Runway initially established the benchmark for tech-enabled company multiples. Allbirds subsequently influenced this benchmark, but Rent’s post-IPO performance has tempered expectations.

The trading performance of Allbirds and the pricing of Sweetgreen’s IPO will provide crucial data points. These will allow for a more precise determination of the appropriate valuation multiple for future tech-enabled IPOs.

Looking Ahead

For those following the IPO market, NerdWallet and Expensify are next in line. However, further data regarding tech-enabled companies may be delayed as we analyze upcoming IPOs in the pure-tech sector.