When The Honest Company is listed on the Nasdaq this week, it will be the culmination of a long recovery for the baby and beauty products group co-founded and led by actress Jessica Alba.
The company is expected to price its IPO on Tuesday at a projected valuation of up to $ 1.5 billion, after working to rid itself of much of the damage to reputation and finances from a series of lawsuits and product recalls.
The company, founded in 2011, was valued at $ 1.7 billion in 2015 before controversy over some of its claims to only use natural ingredients in its products. In 2017, Honest also recalled baby wipes because it found mold in some packaging, and baby powder over concerns that it could cause skin or eye infections.
Sales plummeted and the company lost its “unicorn” status, a private company worth more than $ 1 billion.
“Our rapid growth,” Alba wrote in a denominational passage in the IPO prospectus, “compromised key business functions”.
Honest has never been profitable, but its revenue rose from $ 236 million in 2019 to $ 300 million in 2020 as the pandemic fueled a race for cleaning supplies and other household essentials. . This brought sales back to the level the company last enjoyed in 2016.
Losses narrowed last year to $ 14 million, from $ 31 million in 2019.
Honest has previously said he plans to price his offering between $ 14 and $ 17 per share, with the aim of raising up to $ 505 million, a majority of which will go to existing investors who sell part of their stake. .
Alba had been inspired to launch the brand after the birth of her first child left her scrambling to find household products that she deemed safe to use around her daughter. It is committed to imposing an “honest standard of security and transparency” on the company.
Honest markets its products as natural, boasting that “we ban over 2,500 questionable ingredients.” It is one of many manufacturers of consumer goods seeking to tap the appetite of buyers for household products considered to be non-synthetic and durable.
The company always reports “health and safety incidents or advertising inaccuracies” as an ongoing risk factor in its prospectus. Last January, the brand launched a voluntary recall for one of its bubble baths, fearing it could cause infections.
Ahead of the IPO, the company announced two weeks ago that Alba would step down as chairman of the board when the company was listed, handing over the role to James White, former managing director of Jamba Juice. She will remain the chief creative officer of the company, with a salary of $ 600,000 per year and, according to the prospectus, the key to the future success of the company.
“Jessica Alba is a globally recognized Latina business leader, entrepreneur, lawyer, actress and New York Times bestselling author,” he said. “Our brand can. . . depend on Ms. Alba’s positive image and public popularity to maintain and increase brand recognition. “
Alba’s 6.1% stake after the IPO would be worth around $ 96 million, if it is in the high end of the target range.
CEO Nick Vlahos’ 3.8% stake will be worth $ 61 million. Vlahos has been leading Honest’s recovery since 2017, when he replaced co-founder and serial entrepreneur Brian Lee.
Honest secured a $ 200 million investment from consumer-focused private equity group L Catterton in 2018. The group is selling about half of its current 37.1% stake in the offering, enough to recoup that investment , leaving a 17.4% stake with an additional value of $ 267. m at the top of the IPO range.
Morgan Stanley, JPMorgan and Jefferies lead the offer.