Purple Innovation Stock Falls 5% as Company Preps to Sell 14M Shares

Shares for direct-to-consumer (D2C) mattress brand Purple Innovation were down about 5% in early trading Friday (March 25) after the company announced it will sell 14 million shares of its Class A common stock to the public through Tuesday (March 29).

Purple’s stock closed Thursday (March 24) at $6.51 after peaking in the range of $40 per share in February 2021.

Purple’s underwriters will get an additional 2.1 million shares of Class A common stock as part of the deal, with the goal of reaching $25 million cash on hand or more from the selloff’s net proceeds.

That money will be used to prepay the outstanding balance of Purple’s revolving loans, according to a September 2020 credit agreement that’s been amended twice in the past month.

Purple can use any remaining net proceeds beyond the $25 million threshold for working capital and general corporate purposes, including capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses.

Related: Casper, Purple Struggle With Capacity To Meet Growing Demand

In August, PYMNTS reported on how Purple Innovation and competitor Casper Sleep were both struggling with supply chain issues amid increasing demand for their products, with consumers increasingly focused on home, health and wellness as the effects of COVID-19 pandemic began to ease.

Sleep Number executives also said in July that component shortages and issues with suppliers slowed down deliveries in the second quarter of 2021, extending customer delivery windows by up to six weeks.

Purple is still trying to recover from a manufacturing accident in May that killed a woman after she was pulled into a machine. The company said that, following the implementation of additional safety measures, production levels returned to anticipated levels during the last week of July.

Purple estimated it lost about $50 million in sales in the second and third quarters of 2021 because of production issues. The company vowed to increase production and said it was increasing prices to overcome the myriad obstacles it had encountered.