Stitch Fix revised where it would price its IPO lower last night ahead of trading, and it looks like it helped approach the right sweet spot as a result when it made its debut today.
The company saw around a 15% pop in its stock when it began trading this morning — the benchmark companies tend to look to hit when they go public is around 20% — and fell around the lower bounds of the range it initially set when it went out to raise money. The company raised $120 million in its IPO, selling 8 million shares after tuning down its offering ahead of its first day of trading.
Today’s situation with Stitch Fix is a sample of the careful balance companies want to achieve when they go public, aiming to raise as much money as they can while still ensuring that they see a bit of a bump when they go public. Stitch Fix is one of a new breed of e-commerce companies, and it has to pitch Wall Street that it can be a consistent business and remain profitable over time. The company makes its pitch to investors the weeks following its official filing for its IPO and then tries to calibrate where it should price its shares in the process.
Stitch Fix was able to show signs that it was able to be profitable for a few quarters in its lifetime, but as it expands to new markets beyond its original prospect (like menswear), it has to show it has a playbook that can grow into new markets and keep it profitable. That might weigh on Wall Street as it looks to temper its expectations following the much-hyped and then-faltering consumer IPOs for Snap and Blue Apron. It began losing money over the past two quarters.
The company initially priced its IPO between $18 and $20 per share, and then ended up reducing it to $15 the night before trading. At the start of trading, Stitch Fix bounced somewhere between $17.25 and $18.50, sitting it roughly at the bottom end of that range in its midpoint. So it looks like Stitch Fix set its expectations in a way that would still spur that demand. At $18, the company is still valued north of $1.5 billion, though it still remains to be seen where Stitch Fix will inevitably land. The company’s last private financing round valued it at $309.31 million, according to data from PitchBook.