Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/realreal-inc" target="_blank" data-smartkarma-citation="entities:28125:1" rel="noopener">RealReal Inc (REAL US)</a> IPO starts trading this week. RealReal plans to raise up to $285 million, valuing the company at $1.6 billion in market cap, representing 7.6x P/S (2018) and 5.2x P/S (2019E). If the underwriters exercise their greenshoe option of 2.25 million additional shares, in which case The RealReal could raise as much as $328 million. The RealReal is offering 15 million shares at $17 to $19 per share.Implied valuation price - We used 5.4x EV/Sales multiple (2019E), which is 10% discount to Farfetch's EV/Sales multiple, and applied our base case sales of $299.4 million to derive EV of $1,617 million. After applying estimated net cash of $340 million, this results in an implied market cap of $1,957 million for RealReal. The implied price is $24 per share, which is 33% higher than the mid-point of the IPO price range of $18. As such, we are positive on the RealReal IPO and expect a solid upside to the initial IPO price. Is a 10% discount EV/Sales valuation to Farfetch appropriate? We expect RealReal's sales growth to be slightly better than that of Farfetch in the next two years. However, a key reason why we placed a slight discount to Farfetch is because of RealReal's lower operating margins. For example, Farfetch's operating margin averaged -27% in 2017 and 2018. In the same period, RealReal's operating margin was -37%. Although we expect RealReal to start generating positive operating profit in about five years, that is still a long time away and there are still a lot of concerns about the company's ability to generate positive profits in the future.

RealReal Inc (REAL US) IPO starts trading this week. RealReal plans to raise up to $285 million, valuing the company at $1.6 billion in market cap, representing 7.6x P/S (2018) and 5.2x P/S (2019E). If the underwriters exercise their greenshoe option of 2.25 million additional shares, in which case The RealReal could raise as much as $328 million. The RealReal is offering 15 million shares at $17 to $19 per share.Implied valuation price - We used 5.4x EV/Sales multiple (2019E), which is 10% discount to Farfetch's EV/Sales multiple, and applied our base case sales of $299.4 million to derive EV of $1,617 million. After applying estimated net cash of $340 million, this results in an implied market cap of $1,957 million for RealReal. The implied price is $24 per share, which is 33% higher than the mid-point of the IPO price range of $18. As such, we are positive on the RealReal IPO and expect a solid upside to the initial IPO price. Is a 10% discount EV/Sales valuation to Farfetch appropriate? We expect RealReal's sales growth to be slightly better than that of Farfetch in the next two years. However, a key reason why we placed a slight discount to Farfetch is because of RealReal's lower operating margins. For example, Farfetch's operating margin averaged -27% in 2017 and 2018. In the same period, RealReal's operating margin was -37%. Although we expect RealReal to start generating positive operating profit in about five years, that is still a long time away and there are still a lot of concerns about the company's ability to generate positive profits in the future. 

The RealReal (REAL US), the largest online marketplace for authenticated, consigned luxury goods in the world, is getting ready for an IPO in the next few weeks. The consumers that own luxury goods such as a Prada bag but want to sell it can mail it to the company or drop it off at The RealReal stores. The RealReal would then authenticate the Prada bag and resell it. The company generated revenue of $207.4 million (up 54.9% YoY), gross profit of $136.9 million (up 56.2% YoY), and operating loss of $73.9 million in 2018 (from operating loss of $51.8 million in 2017). The RealReal is doing a very good job in generating repeat buyers. The RealReal repeat buyers as a percentage of GMV improved from 78% in 2015 to 80.7% in 2017 and 82.2% in 2018.

The RealReal (REAL US), the largest online marketplace for authenticated, consigned luxury goods in the world, is getting ready for an IPO in the next few weeks. The consumers that own luxury goods such as a Prada bag but want to sell it can mail it to the company or drop it off at The RealReal stores. The RealReal would then authenticate the Prada bag and resell it. The company generated revenue of $207.4 million (up 54.9% YoY), gross profit of $136.9 million (up 56.2% YoY), and operating loss of $73.9 million in 2018 (from operating loss of $51.8 million in 2017). The RealReal is doing a very good job in generating repeat buyers. The RealReal repeat buyers as a percentage of GMV improved from 78% in 2015 to 80.7% in 2017 and 82.2% in 2018.

The RealReal IPO Preview: The Devil Wears Prada, Chanel, Louis Vuitton, Gucci, & Secondhand Too!

United States

The RealReal, Inc. owns and operates a members-only consignment marketplace for luxury goods. The Company specializes in curating and authenticating a full range of previously owned luxury products such as clothing, shoes, accessories, and jewelry that are sold on consignment. The RealReal markets its products and services throughout the United States.

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RealReal Inc (REAL US)

The RealReal IPO Valuation Analysis

RealReal Inc (REAL US) IPO starts trading this week. RealReal plans to raise up to $285 million, valuing the company at $1.6 billion in market cap,...

Douglas Kim

The RealReal IPO Preview: The Devil Wears Prada, Chanel, Louis Vuitton, Gucci, & Secondhand Too!

The RealReal (REAL US), the largest online marketplace for authenticated, consigned luxury goods in the world, is getting ready for an IPO in the...

Douglas Kim

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