Is Casper Ready to Go Public?

Written by Jennifer Clark
Posted January 15, 2020

Buying a mattress is a very important purchase. You spend a lot of time sleeping and sleep is crucial to your health. In the past, when shopping for a mattress you’d go to a specific store that sold mattresses. There were a few popular brands that seemed reliable at a decent price. If you knew a brand was good, it would be the brand you’d look at. You would spend a lot of money on something that would be so vital to your life — but a lot has changed since then.

There are a lot of mattress startups out there, and if you’ve recently shopped around for a mattress, as I did just a few months ago, then you know what I’m talking about.

There are numerous mattress companies claiming to give you the sleep you deserve at the right price, not to mention the convenience of having the mattress delivered to you in a box or a bag, reducing the stress of wondering how you'll get the mattress into your home or apartment. I did a lot of research when looking for my mattress and knew I wanted something that would be one less thing to carry up to my third-floor apartment. 

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Online Mattress Company Casper Set to Go Public

It’s been a hot market in recent years and could get even more prosperous in the years to come, which is why the online mattress startup Casper has decided it's time go public. Last week the company filed its prospectus with the U.S. Securities and Exchange Commission, giving us a glimpse into this particular industry for online mattress startups. Casper is planning to list on the NYSE under the symbol “CSPR.” 

Since 2016, the company has spent $423 million in marketing, and for every $1 it has spent on marketing, the company has brought in $2 in revenue. And last year, sales and marketing costs accounted for more than 73% of its gross profit. The company feels it’s important to dominate in its marketing efforts, helping Casper stand out from its competitors. 

In 2017, Casper CEO Philip Krim said, “The best thing we can do is have people see one of our ads and think, ‘Oh, that’s fun and tongue-in-cheek.” It’s a classic marketing tactic that usually works, however, it could also pose a big threat to the company. In its prospectus, under the risk factors of its S-1, the company indicates that “The use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.”

Casper relies on social media and social media influencers to help advertise and market its products, but influencers have no binding contract to Casper. Influencers act independently and, most often than not, tell their own opinions on a product. 

In addition, there is the risk that an influencer could damage the reputation of Casper. If they say something or do something that reflects poorly on the Casper brand, it would make all the money that Casper uses for marketing and sales seem pointless since the company is spending money to curate a specific brand to the public that now has the interest of potential investors. Casper wrote in S-1, “It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases.”

What to Keep an Eye On

Some other things to note while looking over Casper’s IPO prospectus. You will see that the company is not profitable yet and in 2018 generated $358 million in revenues and reported $92 million in losses. For the first nine months of 2019, it made $312 million in revenue, which was below expectations of having a revenue goal of $556 million for 2019. 

The last time the company reported its valuation it was just over a $1 billion valuation. In the prospectus, Casper outlines its growth in other areas beyond mattresses while still maintaining its presence in the realm of sleep, which it calls the “sleep arc.” It expects the global sleep market to grow at twice the rate of the global economy to $432 billion. By 2024, Casper expects the global sleep market to be worth $585 billion. 

If that is the case, the company will need to expand into other products besides mattresses, and that’s exactly what it’s doing. In its prospectus, it listed a product lineup that included pillows, bedding, bed frames, weighted blankets, lamps, room diffusers, humidifiers, sleep apps, bedside clocks, white noise machines, and the list went on. Casper even has its eye on the medical devices market. 

That's all well and good, but as Casper approaches its IPO date it'll need to focus on how it will reduce marketing and sales costs, especially if they have big plans for other products that will also cost the company money.

Until next time,

Jennifer Clark
Pro Trader Today
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