Ahead of The RealReal’s IPO, Here’s What Experts Are Saying

The RealReal Inc. is laying the groundwork for its IPO this week, becoming the first player to go public in the U.S. resale market.

On Thursday, the San Francisco-based company will trade on the Nasdaq under the ticker “REAL,” offering 15 million shares priced between $17 and $19 each. It expects to raise up to $285 million and be valued at roughly $1.5 billion.

The RealReal’s IPO marks a big moment for the re-commerce sector, which is growing 20 times faster than the broader retail market, according to Coresight Research — with the total U.S. apparel resale market on track to a $33 billion worth by 2021.

It also underscores the increasing power of other resale marketplaces including Poshmark, which plans to file for an IPO this year, as well as secondhand sellers like ThredUp and Depop. (The RealReal sells pieces from designer names including Chanel, Hermès, Louis Vuitton, Gucci and Prada, which the site reports are its top five selling brands.)

“More niches are emerging in the resale market,” said Jeff Van Sinderen, research analyst at B. Riley FBR. “One could argue that the high end of resale for apparel, handbags and footwear remains in the early stages of development … This IPO adds more fuel to growth of the resale market for luxury items.”

Ahead of The RealReal’s public offering, retail investment research firm Jane Hali & Associates LLC was also upbeat positive on the resale market’s potential.

“We feel the luxury resale market is just beginning,” the researchers wrote in a note this week. “We like the shared economy spin The RealReal has on luxury resale. The company and the planet benefits from the shared economy concept, including sustainability, that is resonating with consumers.”

However, it cautioned The RealReal’s spending across operations and marketing. In 2018, the company’s operating expenses shot up 52% to $210 million, while its marketing costs rose 15% to $42 million. The RealReal recorded revenues that increased 55% to $207.4 million last year but has been operating at a net loss of $75.8 million.

In its registration statement, founder and CEO Julie Wainwright wrote, “In particular, we are making significant investments in our marketing initiatives, expanding our operations and infrastructure, developing and introducing new technologies and automation and hiring additional personnel. These efforts may be more costly than we expect and may not result in revenue growth.”

The RealReal — which was founded in 2011 — has expanded exponentially, raising $115 million in Series G funding last year as well as investing in permanent brick-and-mortar stores in New York and Los Angeles.

After going public, the company will have 82.7 million shares outstanding. While it intends to use most of the offering’s proceeds for general corporate purposes, including operating expenses and capital expenditures, 1% will be used to fund The RealReal Foundation, a Delaware-based nonprofit and charitable organization.

The company is also currently involved in a lawsuit filed by Chanel in November, when the fashion house alleged that The RealReal “misrepresented certain counterfeit Chanel products as authentic Chanel products.” The RealReal has since denied all claims and filed a motion to dismiss, which is still pending.

Watch FN’s interview with these top shoe players.

Want more?

A Look Inside The RealReal’s New Madison Avenue Store

Will The RealReal Be the First US Resale Site to File for an IPO?

The RealReal’s Sustainability Calculator Shows How Consignment Helps Save the Planet

TOMS Sponsored By TOMS

Building Business to Improve Lives

TOMS discusses its approach to mental health awareness and female empowerment through impact initiatives in the footwear segment.
Learn More

Access exclusive content