IPO Update: Casper Sleep Proposes IPO Terms

Summary

• Casper Sleep said it wants to raise $150 million in an IPO.
• The company sells mattresses and sleep-related products direct to consumers.
• CSPR believes its TAM is much larger and that it can successfully capture more value and do so profitably.
• I'm skeptical that it can and even so, at the likely large amount of additional investment while the firm continues with high operating losses and negative free cash flow.
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Quick Take

Casper Sleep (CSPR) has filed to raise $150 million from the sale of its common stock in an IPO, per an amended registration statement.

The company sells sleep mattresses and other related products direct to consumers.

CSPR has grown revenue quickly, but also is generating high operating losses and cash burn.

Management believes it can capture significant value throughout the ‘Sleep Economy’ but I’m skeptical it can profitably happen at all and more skeptical as to the additional investment required to succeed.

Company & Technology

New York, NY-based Casper was founded to sell mattresses in a direct-to-consumer business model.

The firm seeks to expand its category to provide a complete range of sleep related products across the ‘Sleep Arc,’ what it calls the larger 'Sleep Economy.'

The chart below shows an overview:

Management is headed by Chief Executive Officer Mr. Philip Krim, who has been with the firm since 2013 and was previously CEO at Vocalize Mobile and CEO of The Merrick Group.

Below is a brief overview video of Casper's sleep product design:

Source: Casper

The company’s primary offerings include:

• Mattresses

• Pillows

• Sheets

• Duvets

• Bedroom furniture

• Sleep accessories

• Sleep technologies

• Sleep services

Casper has received at least $307 million from investors including Institutional Venture Partners, New Enterprise Associates, Norwest Venture Partners, Red Cart Ventures and Vaizra US.

Customer Acquisition

The company utilizes a 'direct-to-consumer' or DTC model to acquire customers directly rather than through wholesale distribution relationships.

CSPR currently operates 60 company-owned retail stores and also sells through 18 retail partners.In addition, the company obtains customers through its website and via online and offline marketing efforts.

Sales and marketing expenses as a percentage of total revenue have been uneven but trending downward as revenues have increased, as the figures below indicate:

Sales & Marketing

Expenses vs. Revenue

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.