The Honest Company IPO: valuation and share price
The Honest Company went public on Wednesday 5 May 2021 on the Nasdaq stock exchange under the ticker HNST. The company offered more than 25.81 million shares at $16 each, which was in the middle of its expected $14-$17 range.
The pricing means The Honest Company raised $412.8 million, valuing it at $1.44 billion.
The IPO offered employees and company executives the opportunity to sell their shares – an estimated 19.3 million.
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What is The Honest Company?
The Honest Company is a consumer products business that aims to help individuals improve their health.
The enterprise was created by actress Jessica Alba after the birth of her first child. The family’s experience of allergies and asthma – resulting in long hospital stays – led to Alba seeking alternative baby products with non-toxic, eco-friendly perks.
In Alba’s own words: ‘I founded The Honest Company on this idea: Everything that touches you and your family – everything in your home – needs to be nontoxic, needs to be effective and beautiful to look at, and needs to be affordable.’
How does The Honest Company make money?
The Honest Company makes money through the sale of its goods, including childcare products – such as baby diapers and wet wipes – bath products, skincare and beauty items, and home cleaning products. As proportional segments of revenue, these sections make up:
- Diapers and wipes: 63%
- Skin and personal care: 26%
- Household and wellness: 11%
Honest products can be found across 32,000 retail locations including Target, Costco and Amazon. However, Honest is a digital-based company, making approximately 55% of its revenue through online sales.
Is The Honest Company profitable?
No, the Honest Company has not been profitable since it launched and expects to continue making a loss as it grows. The company also doesn’t expect to pay dividends for the foreseeable future.
In earnings released for year-end 2020, the company had net losses of $14.5 million – although this is half its $31 million losses sustained in 2019. For the year ending December 31 2020, The Honest Company generated revenue of $300.5 million, a 28% increase from 2019.
For the three months to March 31, 2020, Honest made a revenue of $72.4 million and net income of $559,000. The company expects revenue growth between 8% and 11% for the first quarter of 2021.
Honest is still classed as an emerging growth company – a company that hasn’t reached an annual revenue of more than $1.07 billion – which means it still won’t have to make the same disclosures required of other public companies.
Who are The Honest Company’s competitors?
The Honest Company is competing with far larger household product conglomerates such as Procter & Gamble and Kimberly-Clark, as well as other companies entering the clean and natural beauty space such as L’Oreal and Estee Lauder.
Honest estimates its market share is approximately 5% of the clean and natural diaper category. HNST has plans to expand, but many of these competitors are far more established and have far larger financial resources.
What is The Honest Company’s strategy?
The Honest Company plans to strengthen its online business and boost its presence in international markets. With the expansion of the market for health-conscious consumers, the Honest Company plans to capitalise on the growing demand.
The money it has acquired through its IPO will be put toward marketing and direct-to-consumer advertising, as well as toward research and development of new products and acquisitions that may complement the brands existing offering.
It’s worth noting that the company’s reputation was called into question in 2017, when The Honest Company had to settle two class action lawsuits over the claims its products had ‘no harsh chemicals’ even though they contained synthetic ingredients. Honest reached a $US7.35 million settlement.
Who are the directors of The Honest Company?
The Honest Company’s management team includes:
- Jessica Alba: Co-Founder
- Brian Lee JD: Co-Founder
- Sean Kane: Co-Founder & Advisor
- Christopher Gavigan: Co-Founder and Chief Purpose Officer
- Muhammad Shahzad: Chief Financial Officer
Other members of The Honest Company’s board are:
- Jeremy Liew: Lightspeed Venture Partners
- Dennis Phelps: Institutional Venture Partners
- Eric Liaw: Institutional Venture Partners
- Neil Sequeira: General Catalyst Partners
- Nick Vlahos: The Honest Company
- Brian Lee JD: The Honest Company
Does Jessica Alba own The Honest Company?
Jessica Alba – the actress best known for her roles in the Fantastic Four and Dark Angel – founded Honest in 2011. However, she is not the sole owner of The Honest Company; there are plenty of investors who own shares of the business.