Rent the Runway IPO Stock Looks Like a Good Buy for Investors

Rent the Runway is a type of e-commerce company focused on fashion. Amazon, an e-commerce powerhouse, has made many investors rich. In fact, its founder Jeff Bezos is among the world’s top billionaires largely because of the stake in Amazon stock. Investors have also seen great gains with e-commerce stocks like Alibaba, JD.com, and eBay. Should you buy Rent the Runway IPO stock? What’s Rent the Runway's stock forecast?

Jennifer Hyman went to Harvard to study business. She met Jennifer Fleiss at Harvard and they founded Rent the Runway in 2009. It started as a platform for women to rent dresses for special events. The business has developed over the years and Rent the Runway now offers a fashion subscription. For a monthly fee, you can rent a number of designer clothes and accessories like handbags from hundreds of brands.

Rent the Runway stock is expected to start trading on Oct. 27. The company filed for the public offering on Oct. 4. Rent the Runway outlined its IPO terms on Oct. 18 and revealed the number of shares it plans to offer and the pricing range. The terms also offered a hint into the valuation the company seeks as it goes public.

The company plans to price its stock in the range of $18–$21 for the public listing and aims to sell 15 million shares. Therefore, the transaction could raise as much as $315 million if the company prices the IPO at the top of the indicated range. Rent the Runway plans to use its IPO proceeds to repay some credit facilities and for general corporate purposes.

If an IPO is oversubscribed, which means that there’s strong demand for a stock, a company can hike the IPO price and sell more shares. That allows the company to raise more money. Rent the Runway plans to list its stock on Nasdaq under the ticker symbol of “RENT.”

The suggested IPO pricing range could value Rent the Runway at as much as $1.5 billion. In 2019, the business was valued at $1 billion. However, the valuation shrunk to $750 million in 2020 after the COVID-19 pandemic struck and had a negative impact on Rent the Runway’s business. The company resorted to aggressive cost-cutting, including layoffs to survive the pandemic. It also sought additional financing.

As companies let their staff work remotely, many Rent the Runway customers didn’t need to rent clothes for the office. Lockdowns amid the COVID-19 pandemic also had a negative impact on the demand for clothes for special events.

Depending on how Rent the Runway eventually prices its IPO and the market appetite, RENT stock could explode on its debut. How the stock will trade in the future will depend on the company’s business performance.

The future looks promising for Rent the Runway. With vaccines allowing companies to bring staff back to the office and travel resuming, the company is poised to see a rebound in the rental demand for work and event apparel.

Rent the Runway's business model emphasizes that renting clothes instead of owning them is good for the environment. The pitch could help it win over climate-conscious customers and investors.

Rent the Runway is backed by prominent investors including Bain Capital Ventures, TCV, Ares Corporate Opportunities Fund V, and Highland Capital. If you missed popular e-commerce stocks like Amazon and Alibaba, you might want to try your luck with Rent the Runway.

Despite the potential rebound in the company’s business, the valuation is still a major concern. Rent the Runway is struggling to get its subscriber numbers to the pre-pandemic level. Also, the company has a history of losses and there’s no telling whether it will turn a profit soon.