Wall Street Welcomes Rent the Runway With Outsized IPO

It looks like investors love a fashion-tech unicorn even more than customers love being able to rent Ralph Lauren wrap dresses and Tori Burch handbags for $99 per month.

Clothing leasing service Rent the Runway shattered expectations on Wednesday when it raised $357 million with its IPO — despite the fact it has lost more than $100 million for two years running. The company unloaded 17 million shares at $21 each, high and above its suggested offering of 15 million shares for $18 to $21, and valuing it at nearly $1.7 billion.

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The IPO could be a vote of confidence from Wall Street in the sustainable fashion industry, as well as the subscription trend, but the blow-out debut has sent some into an existential tailspin about the logic of the stock market. (Someone might want to check on the Axios reporter who called the IPO “the latest evidence that nothing matters”).

Still, Rent the Runway has been floundering since the pandemic wiped out the big meetings, weddings, parties, and brunches for which its wares are most popular:

• Rent the Runway lost unicorn status in 2020 when its value fell from over $1 billion to $875 million despite cost-cutting measures such as laying off hundreds of employees, shuttering stores, and launching a work-from-home, Zoom-friendly category full of cardigans and sweatpants.
• The company reported losses of over $150 million in both 2019 and 2020 after raising $700 million in VC funding.

Blouse Grouse: Rent the Runway is seeing some customers return post-Covid, but its subscriber base is up to just 112,000, having fallen from 133,000 to 55,000 during 2020.

New Lease On Life: The resale industry, led by bazaars like Poshmark, Depop, and ThredUp, hit $40 billion this year and is growing at a 15% annual clip, while rental is still worth less than $2 billion. Aware of this, Rent the Runway broke into resale this summer, putting once-rentable merchandise up for sale to all comers. As they say, “Who needs to rent when you can own?”