Casper Sleep and the Endless Quest for a Tech Valuation

Casper Sleep has cut the price range for its IPO to $12-$13 a share, giving it a valuation befitting a mattress company and not a tech “unicorn”

Feb. 6, 2020

Why do companies that are not, nor never have been, technology companies try so hard to be treated as such? Well, the answer is actually quite simple: tech companies are more valuable. Their products are more scalable, they grow faster, their margins are bigger, their distribution is easier, their overheads are lighter, and so on and so forth. For this plethora of reasons, investors love tech companies. When a company is going public, trying to garner such investment, and hopefully earn the sought-after moniker of “unicorn”, it’s in their best interest to play up to this trend, even when the reality paints a very different picture.

Let’s look at the success rate of a few pseudo-technology companies who’ve gone, or attempted to go, public recently:

  • Blue Apron (NASDAQ: APRN), a meal-kit delivery company, has fallen from a split-adjusted stock price of $150 in June 2017 to about $4 today
  • Uber (NYSE: UBER), a ride-hailing company, lost more money than any IPO in the U.S. since these statistics began recording in 1975
  • Lyft (NASDAQ: LYFT), a slightly smaller ride-hailing company, has tanked roughly 40% since its IPO last June
  • And last but definitely not least, WeWork, an office leasing company. A capitulation for the ages which saw more than $40 billion in market value disappear into thin air and a cancelled IPO 

All of these companies have the same things in common: they brought an incredible amount of hype to their IPOs, they were not making a profit, they have tanked since then, and they have never sold technology products. 

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Casper Sleep’s IPO

These tales of hubristic woe bring us to the crux of the matter: Casper Sleep, which will be going public today under the ticker (NYSE: CSPR), and a CEO, Philip Krim, who had become obsessed with running a “unicorn” to the point where he had derailed sales talks with Target (NYSE:TGT) amongst others because they failed to come up with a valuation that boasted three commas. They are a direct-to-consumer mattress company which, before it filed its S-1, had a private valuation of $1.1 billion, putting it in “unicorn” territory by the skin of its teeth. However, since it has announced its intentions to go public, this valuation has been slashed and the company is now set the range for its IPO to $12-$13 a share, giving it a valuation of roughly $500 million.

Casper shares the same penchant for flowery language and overly-optimistic market valuations as their pseudo-tech predecessors. The mattress company has donned itself “the pioneer of the sleep economy”, valued by Casper to be worth as much as $432 billion globally and $80 billion in the U.S. It reminds me of when WeWork, in an Atlas-like gesture to us grateful global citizens, promised to “elevate the world’s consciousness.”

Thankfully, as investors, we saw through the veil of bullsh*t which proved too thin to cover up a company hemorrhaging money with despotic corporate governance. And to a lesser extent, we see through Casper as well. We’re not interested in investing in “the Nike of sleep” or sleep economy pioneers. In an attempt to pull the woolen weighted blanket over our eyes, Casper has been found out as another wanna-be unicorn whose balance sheet and market cap are sleeping in separate beds. Its valuation being slashed in half right before its IPO is a testament to investors pushing back and calling BS on what is basically a bait-and-switch. Casper Sleep will IPO as a mattress company and nothing more.

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MyWallSt operates a full disclosure policy. MyWallSt staff does not currently hold long positions in companies mentioned above. Read our full disclosure policy here.