The Real Real IPO
Hey there traders! How's it going? I am so excited to dig into this next IPO that has been out for about 5 months now. I hadn't actually heard about this company until about 2 months ago when I heard an advertisement for them on a few podcasts that I listen to. So let's learn a little about The Real Real and discuss some possible trade setups!
The Real Real was founded in 2011 by Julie Wainwright and it is a brick and mortar and online reseller of Authenticated luxury goods which includes everything from mens and women's fashion, watches, home goods, jewelry, purses and more. I'll be honest, I actually hate the companies name, which to mean sounds like pre-teen video game slang even though they sell luxury goods, but they didn't ask me. ;) Right now sales are done primarily online but they do have three brick and mortar shops; two in New York and one in California.
So how does The Real Real work? All items that are sold through the RealReal still belong to you, they just provide the platform on which to sell them. You start off by shipping your luxury good to the RealReal. After it is inspected and verified, they will list it online for the price that is completely chosen by them. Upfront costs include $100 per fine art piece and $15 per every other item (this fee reflects up-front costs of including storing, cataloging, and photographing the item in preparation for sale.) The RealReal generates income from the commission they take from making the sale of your items. They are pretty high, although it's not unheard of for consignment shops. You are typically looking at between 30% to 50% depending on the price of the item being sold. According to The RealReal Q2 Total Revenue Increased 51% Year over Year to $71.0 million and Total Revenue increased $24.0 million to $71.0 million, up 51% year over year. With that being said, they are still loosing money, Adjusted EBITDA was $(20.9) million or (29.4%) of total revenue.
Online consigners are not new to the internet. Ebay has been around for years. But new clothing consigners are starting to pop up everywhere. You have likely heard of ThredUp or Poshmark. And while these are both online clothing consignment shops they do not specialize on the high end brands. It is not impossible to find a few sprinkled here in there, but you are dealing with simply a lower tier of products. Their edge is, The RealReal has staff on site that are specialized in authenticated luxury brands and know how to price and move them accordingly. Selling high end goods mean you have to have the ability to spot fakes and dupes. When you sell high end goods, your name has to be something that your customers trust to do just that. I do think this company has a lot of potential. With Millennial's and the generations younger than them are increasingly concerned with the reuse and recycling of goods, I expect to see these type companies doing very well.
The RealReal IPO'd on June 28th of this year and since then has just dropped. Typical. Right now it is trading around $17. Here is what Newsome kind of expects this thing to do in the short term. He will review this one in the upcoming Merchant Monday Afternoon Swing Trading Room. Recently, many IPO's have been really hit hard and have received loads of selling pressure. We are expecting the same on REAL for right now.
I hope you found this enriching! I am so excited to introduce you to new companies! Let me know if you have any IPO's you are interested in learning more about and send them to firstname.lastname@example.org. You rock!
"Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of all, love of what you are doing or learning to do." - Pele