Rent the Runway (RENT) Stock

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Contributor, Benzinga
October 25, 2021

Although the fashion industry appeals directly to consumers’ sense of confidence, it also presents a telling irony. Often, what society considers stylish 1 year can dramatically change the next, resulting in millions of Americans each year dumping their previously prized apparel into landfills across the country. The problem is so bad that even the Environmental Protection Agency (EPA) has some choice words for the phenomenon.

Per the EPA’s blog, people throw away 25.5 billion pounds of useable textiles every year, translating to 70 pounds of “waste” per American. However, this ditching of products of utility is preventable. “Contrary to popular belief,” the agency writes, “donations in any condition are welcomed by both for-profit and non-profit textile collectors.”

Not only that, the BBC reports that the mountainous clothing the global community tosses imposes a huge impact on the environment. Per research by sociologist Sophie Woodward of the University of Manchester, women hold 12% of their wardrobe in an “inactive” status. Further, the difficulty of recycling materials from used apparel presents additional problems.

That’s where the initial public offering (IPO) of Rent the Runway is so fascinating. Through leveraging the power of the sharing economy and subscription-based business models, Rent the Runway allows its core female user base to look great and help the environment while they’re at it.

When is the Rent the Runway IPO Date?

One of the most distinct public market debuts amid a sea of exclusively software and technology-driven offerings, Rent the Runway is a much-needed breath of fresh air. Additionally, that the company is the embodiment of women’s progress in America — former Harvard Business School students Jennifer Hyman and Jennifer Fleiss founded the subscription service, which caters directly to women professionals — allows retail investors to exercise their environmental, social and governance (ESG) muscles.

That’s not to say that Rent the Runway is whimsical. As it states on its website, the service platform is a fashion company with a technology soul. It’s this mixture of social relevance, economic weight and environmental ethos that makes the organization a fascinating inclusion in the upcoming IPO calendar.

On Oct. 18, management set the terms for the IPO, which will see the New York City-based company distribute 15 million shares at a price range between $18 to $21 per unit. In the middle of this estimate spectrum, Rent the Runway will enjoy a market capitalization of $1.4 billion. If plans move according to schedule, the subscription service will price its deal on Oct. 26, with shares going live 1 day later.

The equity unit will list on the Nasdaq exchange under the memorable and appropriate ticker symbol RENT. Several globally recognized financial heavyweights are providing joint bookrunning services, including Goldman Sachs Group Inc. (NYSE: GS), Morgan Stanley (NYSE: MS) and Barclays (NYSE: BCS). Given the number of major underwriters, you can reasonably expect RENT stock to move robustly in the early sessions.

Whether that direction is in a positive or negative trajectory remains to be seen. While RENT stock features compelling narratives specific to the underlying company, 2021 is proving to be the year where outside factors unrelated to a debuting company play significant roles.

On one hand, RENT stock is a clear beneficiary of favorable timing, launching during a period where consumers have grown sick and tired of COVID-19 protocols. But on the other, the supply chain disruption that the pandemic caused impacted virtually all industries, including the fashion and apparel sectors.

Rent the Runway Financial History

According to information provided by Statista.com, apparel industry experts project that the underlying sector will reach a market value of nearly $317.6 billion by the end of 2021. Of this tally, the women’s apparel market commands a majority share, expected to hit $165.9 billion (52%) during the same timeframe. Moreover, experts target a compound annual growth rate (CAGR) of 2.82% between 2021 to 2026, facilitating a large total addressable market (TAM) for Rent the Runway.

More importantly, though, the fashion subscription service — which allows women to access thousands of designer styles for a monthly rate — is one of the front-facing brands of the steadily expanding sharing economy. According to the Brookings Institution, “the number of non-employer businesses in the United States has grown from 15 million in 1997 to 24 million in 2014,” implying ample opportunities for service-related solutions from rising familiarity with the sharing concept.

Also, the organization points out that 68% of workers in the sharing economy are between ages 18 and 34. This demographic reality will forge a paradigm shift in both the professional world and commerce, which organically supports the case of RENT stock.

Despite the clear catalysts for Rent the Runway, the biggest hurdle for the company may be its rich premium. According to The Wall Street Journal, the fashion service may end up commanding a valuation of $1.5 billion if its IPO prices at the highest end of the range. However, justifying this tally could be problematic.

In the midst of the COVID-19 pandemic, Rent the Runway cut costs by 51% and furloughed or laid off half its workforce but the company still struggled. The WSJ noted that “revenues decreased by 39% to $157.5 million in fiscal 2020. Active subscribers shrunk to about 54,000 in the summer of 2020 from more than 133,000 as of Jan. 31 of that year.”

Still, it’s not fair to leave the narrative in the doldrums. This year, however, there has been a rebound, as widespread access to COVID-19 vaccines paved the way for social gatherings and a return to the office for some. In its latest IPO filing, Rent the Runway said that as of the end of September the number of active subscribers had grown to roughly 112,000.

Rent the Runway Potential

About the only thing that analysts can decisively agree on regarding the potential of RENT stock is that, per the WSJ’s wording, the “IPO will be closely watched” due to its “relatively high profile.”

For better or for worse, RENT stock will test the viability of the much-discussed ESG ethos. While it feels great to publicly promote women’s progress in the workplace, will investors put their money where their mouth is? In many ways, Rent the Runway is a social and political battleground as much as it is a commercial arena.

Equally concerning regarding the upshot of RENT stock is the labor force participation rate for women. At 55.9% as of September 2021, women’s participation in the workforce has dropped to levels not seen since 1987. If this metric doesn’t improve quickly to pre-pandemic norms, Rent the Runway’s single-gender focus could end up hurting the overall business.

In spite of several key headwinds, RENT stock is on the upswing of an awful pandemic that disproportionately impacted women’s fashion. With non-essential activities limited and work occurring remotely, women found little incentive to secure access to designer labels. Mass cabin fever and the desire to make up for lost time has swung the compass in the other direction, which Rent the Runway could parlay to its advantage.

How to Buy Rent the Runway IPO (RENT) Stock

For most retail investors, you must buy RENT stock at the open, which is the easiest process if you already know how to buy stocks. If not, follow the steps below.

Step 1: Pick a brokerage.

With most brokerages offering similar financial incentives to join, you should narrow your list of best brokers to platforms that suit your investing style but that will also accommodate your desired growth.

Step 2: Decide how many shares you want.

Because IPOs deal with the unknown of public sentiment and acceptance, you shouldn’t put all your eggs in 1 basket. Therefore, choose a balanced share count to mitigate downside risk.

Step 3: Choose your order type.

Before placing your wager, learn these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the prevailing rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).

RENT Restrictions for Retail Investors

Before participating in an IPO, review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons. In short, anyone with privileged (non-public) information should not participate in a new offering.

RENT Pre-IPO

Typically, only institutional investors have access to pre-IPO pricing (or new shares at their initial offering rate). However, companies like ClickIPO democratize this process by distributing pre-IPO shares for select opportunities.

A Fashion-Forward IPO with Upside Potential

By opening opportunities and preventing waste, woman-run Rent the Runway maximizes the potential of the ESG narrative, combining desirability and environmental sustainability under 1 umbrella. At the same time, prospective buyers must decide whether the premium of RENT stock justifies this haute couture investment.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.