Number Crunch

Will Warby Parker’s IPO Success Open the DTC Floodgates?

Some investors warn that the eyewear company is being viewed through rose-tinted glasses

$6 billion: Warby Parker’s staggering valuation after its stock prices soared 36% during its debut on the stock market last Wednesday.

Many eyeballs were fixed on Warby Parker’s stock market debut on September 29, eager to see how the market would react to a DTC brand going public. The company, which sells eyeglasses online directly to consumers, has been at the forefront of the growing wave of DTC companies, and its performance will likely set the tone for other brands in the future. The result of the IPO listing was a smash hit. The share price jumped as high as 36% before closing slightly down at $53.05, giving the company a staggering valuation of $6 billion — well above expectations and predictions. (The company was valued at $3 billion after its last funding round in August 2020.)

However, many investors immediately raised concerns, believing that the stock was overvalued and that the market should proceed with caution. The criticism makes sense; for starters, the company isn’t profitable, despite being over a decade old, logging a $7.3 million loss for the first six months of 2021. The company has also suffered the effects of the pandemic, having to shut down its trendy retail stores temporarily, and has recently faced supply chain issues. As shoppers return to in-person shopping, Warby Parker plans to expand its retail footprint by building over 30 new stores each year, and is confident of achieving profitability in the near future.

Should Warby Parker stock price hold over the coming weeks and months, it will open the floodgates for a host of other online brands to go public. Many have already begun procedures, including fellow DTC heavyweight Allbirds. Dan McCarthy, an assistant professor of marketing at Emory University, believes the market’s positive perception of Warby Parker is the indication others have been waiting for. Speaking to CNBC, he commented, “This is a very strong signal that companies looking to go public have a receptive market to sell into, if they were to.”