The Honest Co., the company founded by actress Jessica Alba in 2012 with the conscious consumer in mind, has filed to go public.
The company will trade on the Nasdaq under the ticker “HNST.”
The company disclosed Monday that the IPO is expected to price between $14 and $17 a share. A total of 25.81 million shares are being offered in the IPO, with the company offering 6.45 million shares to raise up to $109.7 million and selling shareholders offering 19.36 million shares to raise up to $329.0 million. The company expects to have 90.52 million shares outstanding after the IPO.
The company could be valued at $1.5 billion.
Lead underwriters for the initial public offering are: Morgan Stanley, JPMorgan and Jefferies.
Alba said in a founder’s letter included in the prospectus that the idea for Honest Co. HNST, came from her own experiences treating allergies and asthma, including long hospital stays, and her efforts to lobby legislators on Capitol Hill for chemical legislation reform.
Today, she serves as chief creative officer of the Los Angeles-based company and Nikolaos Vlahos, is chief executive. Vlahos joined Honest Co. in 2017 after working at Clorox Co. CLX, -0.76%, where he was chief operating officer of household, lifestyle and core global functions.
Honest Co.’s revenue in 2020 totaled $300.5 million, up from $235.6 million in 2019. The company had a net loss for the year of $14.5 million.
Honest Co. has products across three categories: diapers and wipes, which represented 63% of 2020 revenue; skin and personal care, which rang up 26% of revenue in 2020; and household and wellness, with 11% of 2020 revenue.
Honest Co. is classified as an “emerging growth company,” which means it does not have to make the same disclosures required of bigger public companies. A business remains an emerging growth company until it reaches a number of milestones, including annual revenue of more than $1.07 billion.
The company warns that it has incurred net losses each year since it launched, and will likely increase expenses as it expands and grows.
However, the company notes that, with consumer interest in health and wellness and “clean” products, it is doing business in growing categories. Honest Co. estimates that in 2019 the U.S. clean and natural diaper category generated about $1 billion; skin and personal care generated $12 billion; and household and wellness totaled $4 billion in retail sales.
The compound annual growth rate (CAGR) of those three categories between 2019 and 2025, respectively, is expected to be 16%, 10% and 4%.
Honest Co. estimates that its market share is about 5% “providing significant room for growth,” the prospectus said.
Honest Co. is also digitally native at a time when consumer shopping behavior is trending online. In 2020, 55% of revenue was generated online and 45% through retail channels.
Here are 5 more things to know about Honest Co.:
Honest Co. doesn’t plan to pay a dividend for the foreseeable future. The company plans to use the proceeds of the IPO for general corporate purposes, including operating expenses, working capital and marketing.
Online order deliveries are carbon neutral. In 2020, the company joined a program to offset the greenhouse gas emissions from its online sales through the end of 2022. The company achieved that goal between May 2020 to October 2020, and expects to continue to do so through next year.
Honest Co. is diverse, including at the executive level. As of Dec. 31, 2020, nearly half of the company’s workforce were people of color, 68% of the workforce were women and women represented 53% of leadership.
Other members of the executive team include Kelly Kennedy, chief financial officer, and Sharareh Parvaneh, chief information officer.
Members of the board include Katie Bayne, who has been a senior adviser with Guggenheim Securities, and Avik Pramanik, a 36-year-old partner at consumer-focused private-equity firm L Catterton.
Honest Co. says four “pillars” hold the key to the brand. Those pillars are: clean, sustainable, effective and thoughtfully designed. There are more than 2,500 chemicals and materials the company excludes from its list of ingredients. Products are made with ingredients that are sustainably-sourced or recycled. And skin and personal care items take allergies and other sensitivities into account.
Damage to the brand, failure to develop the brand, and an inability to leverage brand value are all risk factors that Honest Co. lists.
Honest Co. competes with some of the biggest consumer companies on the planet. The clean and natural space is growing more competitive, with big names jumping into the mix.
Among the companies selling products in the same categories as Honest Co. are L’Oreal S.A. OR, -0.52%, Estee Lauder Cos. EL, +0.94%, Procter & Gamble Co. PG, -1.63% and Kimberly-Clark Corp. KMB, -1.12%
“Many of these competitors have substantially greater financial and other resources than us and some of whose products are well accepted in the marketplace today,” the Honest Co. prospectus says.
“Many also have longer operating histories, larger fulfillment infrastructures, greater technical capabilities, faster shipping times, lower-cost shipping, lower operating costs, greater financial, marketing, institutional and other resources and larger consumer bases than we do.”
Additional reporting by Tomi Kilgore.