Rent the Runway Aims at $21 a Share for IPO on $1.5B Valuation

Rent the Runway, a clothing-rental business, will pursue as much as a $1.5 billion valuation in its initial public offering (IPO) next week, The Wall Street Journal (WSJ) reported.

The company, founded in 2008, started a shared designer closet letting women rent single items for special events and has since grown to offer several kinds of clothes from fancy to casual. Much of its revenue is subscription-driven now, according to the report.

The company is looking to sell shares at between $18 and $21 each for a fully diluted valuation of $1.24 billion to $1.46 billion, according to a Monday (Oct. 18) filing with the Securities and Exchange Commission (SEC), per WSJ.

The targeted range is above the $1 billion the company claimed as a valuation in 2019. Since then, the pandemic has done away with much of the need for work clothes and events wear, and that has caused the company’s valuation to dwindle to around $750 million, the report stated.

Because of pandemic-related woes, the company had to slash costs by 51%, furlough or lay off half of its staff and raise new financing, according to the report. That still didn’t save Rent the Runway, which saw revenue fall by 39% to $157.5 million in the 2020 fiscal year, with subscribers falling from over 133,000 to 54,000.

But this year, with the advent of vaccines, the company has seen a rebound, the report stated. Active subscribers increased by the end of September to around 112,000.

The IPO will be watched closely, despite the company’s size, because of the high profile it has, according to the report. Investors have been watching to see whether the year will end on a strong note and looking at whether others like Rivian Automotive will do well.

Rent the Runway reported its rebound in a SEC filing for its IPO earlier this year, although some of the pandemic’s revenue pressures are still there.

Read more: Rent the Runway Sees Subscribers Rebound From Pandemic’s Depths

According to the company in its filing, around 80,000 retailers, or 9% of stores, will close their doors in the next five years, so direct to consumer (D2C) has become much more essential.