Stitch Fix Goes Public; Raises $120 Million

Marco Green
November 18, 2017

Stitch Fix stands to raise $120 million after it announced a lower than expected $15 share price and a reduced number of shares on offer.

The deal priced below an initial expected range of $18 to $20, and was reportedly cut in size, from 10 million to 8 million shares, and then ended being over-subscribed, according to TheFlyontheWall.

Experts this early in the game say the main concern for investors was its continued ability to stay profitable, according to a source familiar with the situation.

Stock jumps from IPO prices are particularly important to institutional investors toward the end of the year, as funds close out their books. Shares of Snap are down more than 50 percent since its March IPO, while Blue Apron's stock is down almost 70 percent following its June debut.

Stitch Fix has grown rapidly, thanks in part to $44 million in venture capital funding.

In 2011, Stitch Fix was founded in San Francisco by Katrina Lake, while she attended Harvard Business School.

"I feel like there's a little bit of hair on this one", John Martinko, co-president at Drexel Hamilton, told CNBC's "Worldwide Exchange" on Friday morning.

Its IPO follows the 2017 tech IPOs of Snap Inc. and Blue Apron, both of which have been pretty disappointing.

Stitch Fix is a play on an increasingly popular "subscription box" model, in which customers pay to have regular - often monthly - shipments of goods. More in the company's S1 prospectus. The company uses a combination of algorithms and personal stylists to pick out outfits based on customers' preferences and purchase history, and mails boxes of clothing and accessories to clients for a flat rate of $20 (that fee can be applied toward the purchase of any of the items). It hopes its personalized service will reach and appeal to more shoppers than a traditional e-retailer.

"Under (Lake's) lead, this company has done very well", Smith said.

The company previously raised $42 million from investors including Benchmark and Baseline Ventures.

Stitch Fix's Lake, the only woman to lead a tech IPO this year, still owns roughly 15 percent in her company. The stock trades on the Nasdaq under the symbol "SFIX".

Other reports by Click Lancashire

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