Rent the Runway’s $1.5 Billion Next Step

·2 min read

Rent the Runway’s turn in the limelight is coming up quick.

Jennifer Hyman’s fashion rental pioneer is set to begin trading on Wall Street on Oct. 27 with a fully diluted valuation of $1.5 billion — marking a comeback in the business’ price tag, which was reportedly set at $750 million during a pandemic-era funding round.

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According to a filing with the Securities and Exchange Commission, the company is targeting an IPO price of $18 to $21 a share. That’s the price that institutional investors will pay to buy the shares before turning around and selling them on the open market.

At a midpoint of the valuation, Rent the Runway expects to receive proceeds of about $267 million, which will go to pay down debt and fund future growth.

Rent the Runway is coming to the market amid a rush of other offerings and go-public transactions that has seen Warby Parker Inc., Olaplex Holdings Inc., On Holding, The Honest Co., Dr. Martens, MyTheresa, ThredUp Inc., Poshmark Inc. and others bring in outside investors this year.

All together, that makes a very big fashion freshman class on Wall Street.

It’s a group that brings a host of new ideas and new business models — but is also still in growth mode.

Many of the companies, including Rent the Runway, have proven they can attract investors and buzz, but have yet to produce profits.

For the six months ended July 31, Rent the Runway logged net losses of $84.7 million and adjusted losses before interest taxes, depreciation and amortization of $8.1 million on revenues of $80.2 million.

But the company believes it has set up a business ready to keep growing.

“Our two-sided discovery engine sits at the center of Rent the Runway and creates our flywheel,” the firm said in its registration statement. “As customers experience the magic of wearing whatever they want from an ‘Unlimited Closet’ at a great price, they discover new brands. Brands gain new customers through our platform and significant data insights. The unparalleled value we provide to our brand partners leads them to engage with us more deeply, broaden their assortment on Rent the Runway and work with us in designing exclusive products. As we increase categories and styles available on our platform, we see higher engagement from current customers as they use us more days per year and across more diverse use cases.”

The average Rent the Runway subscriber used the service to get dressed for 51 days in 2017 — a measure that grew to 83 days by 2019, before the pandemic disrupted the market.

Now Hyman, who leads the company as chief executive officer and chair, has to keep up the momentum, with the market looking over her shoulder.

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