Retailers have been applying for IPOs at a steady rate in 2021 despite some uncertainty in the wider economy. The most recent company to explore the possibility is Mattress Firm, while Guitar Center reportedly filed for a confidential IPO, according to anonymous sources cited by Debtwire.
Guitar Center briefly entered Chapter 11 bankruptcy proceedings at the end of 2020 to help reduce its debt load and return to its positive pre-COVID growth trajectory. The music retailer had posted 10 consecutive quarters of growth prior to lockdowns, and it has aimed for further growth with the appointment of Paul Gimenez to the position of Director of Diversity, Inclusion and Belonging.
If Guitar Center has filed for an IPO the paperwork will be made public in approximately two weeks under the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act lets companies keep their IPO plans confidential for 15 days to protect them from immediate media scrutiny, while still giving potential investors time to analyze the financials. Additionally, the company can step back from the IPO before the deadline without letting competitors know about future plans.
Other retailers who filed or plan to file for IPOs in 2021 include Petco, which was valued at $6.4 billion; Authentic Brands Group, which is estimated to be worth as much as $10 billion; and Allbirds, which launched an activewear collection to capitalize on the trendy market ahead of its own IPO.
There are solid reasons why some companies are being cautious with their IPO strategies, while others are shying away from the process altogether. Klarna, one of the biggest players in the hot buy now, pay later (BNPL) space, is holding off due to economic uncertainty. “The volatility in the market right now makes me nervous to IPO to be honest,” CEO Sebastian Siemiatkowski said in an interview with CNBC. “I think it would be nice to IPO when it’s a little bit more sound, and right now it doesn’t feel really sound out there.”
IPOs haven’t worked out for every retailer that has undertaken one this year. Honest Co.’s shares surged 40% to $23 just one day after going public May 2021, but share prices fell to $13 per share by August and dropped to between $10 and $11 in early September. The brand has continued posting quarterly losses since it debuted, with sluggish revenue growth continuing.