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“Going Public” Isn’t As Cool As It Used To Be


Image source: Wikimedia Commons

What's going on?

Clothing startup Stitch Fix completed its IPO on Friday – in other words, its stock traded on public markets for the first time. However, it’s not yet clear if an IPO was exactly the right fit for the company…

What does this mean?

Stitch Fix is an ecommerce clothing company that sells tailored and personally curated men’s and women’s clothing. The business, which was founded in 2011, has grown its revenues to $977 million in the span of just six years, and the company began turning a profit in 2014 (although it did report a small loss this year).

However, it became clear during the IPO process that Stitch Fix wouldn’t raise as much money from new investors as it had hoped – it sold fewer shares than initially intended, and at a lower price. The stock jumped up a bit as it was traded for the first time on Friday, but ended up losing most of those gains as the day went on.

Why should I care?

For markets: With greater investment comes greater responsibility.

Now that Stitch Fix is a publicly traded company, it’ll have to publish quarterly updates on its finances so investors can make sure it’s keeping its (…wait for it…) stitch together. One metric that’s particularly important for an ecommerce company like Stitch Fix is its retention rate, i.e. how many customers make further purchases after using it for the first time. Stitch has said that it’s got much higher retention rates than competitors like Trunk Club.

The bigger picture: It’s been a mixed bag for IPOs this year.

Snap Inc. and Blue Apron both IPO’d this year and neither has performed as well as investors had hoped. However, some lower-profile 2017 IPOs – like Roku and Smart Global Holdings – have played out well for shareholders. Stitch’s stock price ended its first day up only 1%, suggesting investors aren’t convinced of its prospects.

Originally posted as part of the Finimize daily email.

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