Online luxury reseller RealReal Inc. ended its first day as a public company worth almost half again as much as in its $300-million initial public offering.
RealReal’s shares leaped 45% to close at $28.90 on Friday, giving the company a market value of about $2.4 billion. On Thursday, the company sold 15 million shares for $20 each after marketing them for $17 to $19. The shares opened at $28 on Friday.
The San Francisco company, founded by Chief Executive Julie Wainwright, aims to makes it easier to sell and buy used luxury items including clothing, accessories and jewelry on consignment by providing a platform for transactions and verifying that the goods are authentic.
Shoppers, especially millennials, are thinking more about sustainability and what happens to their clothes, Wainwright said in an interview.
“It was like a drumbeat when we started,” she said. “Now, it may not be the first reason they buy, but it’s the second.”
Internet-based apparel resellers such as RealReal, ThredUp Inc. and Poshmark Inc. have emerged as trendy alternatives to the secondhand clothing market. RealReal focuses on luxury apparel items from designers such as Hermes and Louis Vuitton, catering to the high-end fashion market, while ThredUp and Poshmark feature lower-priced items.
Used clothing, footwear and accessories represent a $10-billion market in the United States, according to data from market research firm IBISWorld. Interest from young, sustainability-conscious shoppers has been a boon for the industry, which the firm forecasts will grow about 1.6% a year through 2024.
All this has made old clothing a magnet for investment. Venture capital has poured in, with more than $1.1 billion dropped into used-clothing operations over the last several years, according to data compiled by Bloomberg.
That includes more than $350 million in funding for RealReal and about $130 million for ThredUp. French startup Vestiaire Collective raised $45 million in June to fuel international growth, bringing its total funds to almost $200 million.
RealReal now has a brick-and-mortar store in West Hollywood and two in Manhattan, N.Y., that collect as well as sell goods.
It plans to open more stores and may add to its 11 consignment locations, where customers bring in goods to be evaluated and potentially resold, Wainwright said.
While the market is intrigued by its growth, RealReal has yet to make a profit. The company posted a loss of $23 million on revenue of $69 million in the first quarter, compared with a loss of $14 million on revenue of about $46 million for the same period last year. For all of 2018, it lost $76 million on revenue of $207 million, according to its filings with the U.S. Securities and Exchange Commission.
The offering was led by Credit Suisse Group, Bank of America Corp. and UBS Group, according to the filing. RealReal trades on the Nasdaq Global Select Market under the symbol REAL.