If you’re having trouble reading these words without moving your face inches away from the screen, you might have myopia. A growing medical problem in the U.S., the American Academy of Ophthalmology reported that the proportion of nearsighted people increased from 25% in the early 1970s to 40% around the turn of the millennium.
Of course, the good news for most cases of nearsightedness is that they’re not life-or-death matters. Functionally speaking, people can correct their vision to 20/20 through contact lenses and eyeglasses. But on the other end of the spectrum, prescription eyeglasses are expensive due to the myriad components that integrate into the final product. Further, consumer inflationary trends are not necessarily making this condition any better.
And that’s the core reason why the initial public offering (IPO) of Warby Parker, a direct-to-consumer eyewear company, has intrigued both Wall Street professionals and casual market observers. Specializing in lower-cost eyeglasses, Warby Parker distinguishes itself from other discount-bin retailers with fashion-forward designs. After all, eschewing premium brands doesn’t have to involve sacrificing good taste.
When Is the Warby Parker IPO Date?
Another highly anticipated new public offering for this week based on internet traffic statistics, Warby Parker will make its debut on the IPO calendar on Sept. 29, 2021. Shares will trade on the New York Stock Exchange under the ticker symbol WRBY.
According to the details of its prospectus with the U.S. Securities and Exchange Commission (SEC), the eyewear firm will offer 77.74 million shares of Class A common stock in the IPO. During the first half of this year, Warby sold roughly 2 million shares in a private funding round at a per-unit price of $24.53. If the market happens to price WRBY stock at that rate, Warby would command a valuation of $2.9 billion.
What makes Warby’s public market debut distinct from the traditional IPO process is that its deal is a direct listing. Under the standard framework, financial institutions serve as underwriters — that is, they actually purchase shares of the soon-to-be-public company for distribution to clients, almost always institutional investors like mutual funds.
In addition, underwriters tend to set the initial selling (pre-IPO) price of a new issue below its expected open market price. This discounting incentivizes the underwriters’ clients for taking part in the IPO and helps sweeten the relationship between the 2 entities for future business.
However, there’s no such thing as a free lunch. While pre-IPO buyers may benefit from the acquisition (depending of course on the open market’s reaction to the stock), the issuing company ultimately has to pay for this concession. To sidestep this headwind, many companies choose to direct list, which involves current stakeholders selling their shares to public retail investors.
By default, direct listings do not involve underwriters and in that sense, the pricing dynamics of such IPOs may be fairer to the average Joe or Jane investor; that is, without underwriters acting as an intermediary service, the value of the new issues is theoretically exactly what the free market will bear.
Also, without underwriters setting the pre-IPO price, direct listings feature a reference price. In the case of WRBY stock, the NYSE assigned it a $40 reference price. If this rate sticks, Warby Parker will enjoy a market valuation of almost $5 billion.
Warby Parker Financial History
A classic sign of the times, in 2010, Warby Parker started its corporate life selling prescription eyeglasses online. Considering that e-commerce as a percentage of total retail sales jumped from 4.2% in Q1the first quarter of 2010 to 11% by Q4 2020, the online focus represented a smart strategic decision.
Nevertheless, Warby’s founding team — comprising 4 students from the University of Pennsylvania’s Wharton School — recognized the importance of physical locations for the eyewear and optometry industry. In 2013, the company launched its first brick-and-mortar stores and today, its physical footprint encompasses 145 locations, including 3 in Canada.
More importantly, the company’s financial performance supports management’s strategic implementations thus far. Despite a massive disruption from the COVID-19 pandemic, Warby generated net revenue of $393.7 million, up 6.3% from 2019’s tally of $370.5 million. Both figures were well above 2018’s sales performance of nearly $273 million.
Most recently for the 6 months ending June 30, 2021, the eyewear retailer inked $270.5 million on the top line, up 53% from the year-ago comparison of $176.8 million. With consumers gradually coming out of quarantine, Warby benefitted from retail revenge or the concept where people who missed out on or were denied purchases last year are engaging in them with gusto this year.
However, no investment opportunity is without risk, and WRBY stock is no exception. While growth in the top line is robust, it’s an open question as to whether the underlying company can maintain its trajectory, especially considering rising competition.
Also, several financial analysts have pointed out that the premium for WRBY stock could be excessive given the issuing company’s widening losses. For instance, Warby posted a net loss of almost $56 million in 2020, comparing unfavorably to the breakeven year of 2019 and a negative net print of $22.9 million in 2018.
To be fair, though, the company posted a net loss of $7.3 million in the first half-year period of 2021, an improvement over the $10 million lost in the year-ago comparison. Thus, management is addressing the issue, although it must do more to secure a bright future for WRBY stock.
Warby Parker Potential
Despite the risk of overvaluation, if you’re willing to ride the occasionally choppy waters of directly listed IPOs, WRBY stock offers ample upside potential, mainly stemming from a likely growing user base.
Although a cynical catalyst, the scientific reality is that myopia “is the most common ocular disorder worldwide, it is the leading cause of visual impairment in children, and its incidence is increasing rapidly,” per a September 2019 article from Retina Today. The piece goes on to state, “In 2010, an estimated 1.9 billion people (27% of the world’s population) were myopic, and 70 million of them (2.8%) had high myopia. These numbers are projected to rise to 52% and 10%, respectively, by 2050.”
Granted, the above represents worldwide myopia statistics. However, in North America — Warby Parker’s domain — medical experts project that nearsightedness, which currently affects 34% of the population, will soar to 58% by 2050. Should the company ever decide to expand its geographical footprint, it has ample opportunities.
In southern Latin America, myopia will impact 53% of the populace by the end of the forecasted period. In central Europe, experts project the metric will rise to 54% while in East Asia, it could affect 65%. Therefore, Warby doesn’t need to look far for expanding revenue channels.
How to Buy Warby Parker IPO (WRBY) Stock
Because it’s a direct listing, interested participants of the Warby Parker IPO will be acquiring shares bottled straight from the source. If you already know how to buy stocks, you’ll be at an advantage. If not, follow the steps below.
Step 1: Pick a brokerage.
For serious participants of new public issues, a growing number of best brokers offer pre-IPO access to their members.
Step 2: Decide how many shares you want.
IPOs are unpredictable, and directly listed stocks have a reputation for near-term wild trading. Therefore, it’s imperative that you pick a balanced share count to mitigate risk.
Step 3: Choose your order type.
Before wagering, familiarize yourself with these market concepts.
- Bid: The highest price a buyer is willing to offer.
- Ask: The lowest price a seller is willing to take.
- Spread: Primarily the difference between the bid and ask, the spread also signifies market liquidity and risk. Narrower spreads indicate higher liquidity and lower risk, while wider spreads imply lower liquidity and higher risk.
- Limit order: To buy (or sell) stocks at a specific price, choose limit orders, which provide transparency but no execution guarantees.
- Market order: In contrast, market orders guarantee fulfillment but only at the prevailing rate, which may change substantially during order processing.
- Stop-loss order: A protective mechanism for your account, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only execute at a stipulated price, offering full control in your automated exits. However, such orders carry the same non-fulfillment risk as limit orders.
Step 4: Execute your trade.
Follow these steps to execute a market order:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
WRBY Restrictions for Retail Investors
Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons concerning possible conflicts of interest. Securities officials have zero tolerance for those who profiteer from privileged information.
As a direct listing, Warby Parker did not avail WRBY stock as a pre-IPO opportunity to the public. However, those who are interested in such prospects should consider opening an account with ClickIPO, which buys pre-IPO shares of select enterprises for distribution to its members.
Potential Upside in a Farsighted Play
Although myopia is a serious issue with a widespread impact, efforts to stem the tide have largely been unsuccessful. At the current trajectory, most regions will have a majority population that’s nearsighted. Though cynical, the addressable market for Warby Parker is only getting bigger, which is why patient investors ought to look at WRBY stock.