Target's venture investment in mattress company Casper could prove to be a case of overspending for the retail giant.
Casper pitches itself as a leader in the "sleep economy," selling not only mattresses but lamps, sheets, pillows and other bedroom necessities. Its initial public offering (IPO), set to come next week, is set to be below its past two private venture capital fundraising rates. Its midpoint IPO range of $17 to $19 would represent a 37 percent decline from its share price when Target became an investor in 2017, for the company's Series C fundraising.
Target also has $80 million in equity, according to analysts from IPO research firm Renaissance Capital.
Casper is looking to raise $182.4 million if its shares price at the top of the range. This would bring Casper's value to $768.2 million if underwriters exercise their options. Casper was valued at about $1.1 billion after it raised $100 million in Series D in March of last year.
Renaissance Capital analyst Matthew Kennedy said Target was the "big loser" here, but added that it was not the only one. Kennedy said Casper had been over-valued for years, as far back as its Series B.
Neither Target nor Casper could comment on the developments to CNBC.
Casper's Series B valued the company at $23.12 per share, and its subsequent rounds have been set at $31.25 per share, boosted by a $75 million investment from Target.
Casper's investors could be facing paper losses if the IPO is completed at its current range, as insiders are beholden to the lock-up period for private investors before they can sell. Other investors in Casper have included NBA players Andre Iguodala, Kyrie Irving and Carmelo Anthony, actors Ashton Kutcher and Kevin Spacey and musician Curtis Jackson (50 Cent) in their Series C round.
In the Series B round, celebrities like actor Leonardo DiCaprio, musician Adam Levine of Maroon 5 and music label executive Scooter Braun took part.
The company's total revenue for 2019 was $416 million.