Honest Soars 43% in NASDAQ Debut
Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.
The Honest Company, Jessica Alba's Santa Monica-based maker of consumer goods that promise to be safer and eco-friendly, made a strong debut in its first day of public trading Wednesday.
Its stock closed at $23 a share, a 43% gain from the $16 opening price.
"I feel like this is where we really dig into this next phase of growth, and this is really the beginning for us in a lot of ways," founder and Chief Creative Officer Jessica Alba said Wednesday on CNBC.
Alba's 5.6 million shares and soon-to-vest options are now worth about $130 million.
However, that is dwarfed by the nearly 16 million shares that Scott Dahnke, board member and global co-CEO of the private equity firm L Catterton, owns. His stake is now worth around $360 million. L Catterton invested $200 million in the company in 2018.
Honest, which trades on the NASDAQ as HSNT, raised $413 million in its IPO. The company was founded by Alba and serial entrepreneur Brian Lee in 2011 and sells everything from eco-friendly diapers to skincare products to cleaning supplies.
Honest was rumored to be preparing an IPO in 2016, but after soaring growth in its infancy, the company struggled amidst quality control problems and questions about whether it could live up to its pristine image. The company voluntarily recalled its baby powder and baby wipes in 2017 after concerns they could cause skin and eye infections. The year before, it reformulated its laundry detergent after reports that it misled consumers about ingredients.
Honest has never made a profit but saw gross margins soar by 35.9% last year as the pandemic drove sales of sanitizing products, according to a regulatory filing.
Kyle Guske, investment analyst at New Constructs, says the stock is greatly overvalued and should be trading no higher than $7 a share.
"A valuation at $15/share implies the company's profits will be three times greater than Revlon (REV), and we think the chances of that happening are very low because of the formidable large incumbent personal care products companies with which The Honest Company is competing," Guske wrote in a research note. "The incumbents already own all the shelf space and dominate the industry."
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Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.
