Ready for another celebrity-led IPO? Kate Hudson’s activewear brand Fabletics is eyeing a public offering. The company is already in talks with banks over potential underwriting deals, but the general public awaits further details.
Here’s what to know about a forthcoming Fabletics IPO date, plus all the potential risks and opportunities that could accompany a Fabletics investment.
TL;DR
- Adam Goldenberg and Don Rassler co-founded Fabletics in 2013. They quickly pulled in actress Kate Hudson as a partner (and face) for the brand.
- TechStyle Fashion Group parents Fabletics. TechStyle has raised $336+ million in VC funding for Fabletics and other brands.
- Fabletics is currently in talks with underwriters for a potential IPO that could come later this year or next.
- People familiar with the matter report that Fabletics is aiming for a $5 billion valuation and $500 million in IPO capital.
- Despite controversy, Fabletics has managed to expand to 64 North American retail storefronts and build a strong e-commerce foundation.
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A quick history of celeb-backed Fabletics
Adam Goldenberg and Don Rassler founded Fabletics in 2013, but the male duo didn’t do it alone. They partnered with actess Kate Hudson, who became the face of the athletic apparel brand.
The Fabletics business strategy is interesting: It positions its products in the mid-range between expensive yoga apparel and basic, store-brand options. Fabletics aims to be a step up from off-brand, but a step down from the likes of LuluLemon.
Today, parent company TechStyle Fashion Group holds the reins for Fabletics. Users can buy items on their site or in one of their 64 North American retail storefronts. VIP membership is for those who want a monthly influx of activewear outfits, and buyers can skip any month they don’t want to purchase clothing. Bear in mind that it costs $49.95 per month for “exclusive membership benefits,” per the Fabletics website.
Fabletics fundraising from founding to now
Fabletics, which is headquartered in El Segundo, California, has been a part of a few funding rounds. However, its status as a TechStyle-owned company blurs the specifics.
In 2017, TechStyle valued Fabletics at $1.5 billion. At the time, the parent company contemplated selling the brand, but ended up keeping it on board.
TechStyle also owns brands like JustFab and ShoeDazzle, so any parent company funding rounds aren’t entirely attributable to Fabletics. However, we do know that TechStyle has raised at least $336 billion in venture capital. Given that Fabletics is largely considered the company’s marquee brand, it’s safe to assume that TechStyle has injected a healthy chunk into Hudson’s brand.
Amid the IPO planning phase, Fabletics hopes to achieve a $5 billion corporate valuation.
Path to the Fabletics IPO
In mid-July, reports from the likes of The Wall Street Journal divulged that Fabletics tapped banks for a potential IPO. This move is an exploration into which ways the brand could go public. Right now, there’s no mention of a direct listing or SPAC. Rather, Fabletics seems to be eyeing a traditional IPO.
According to these reports, Fabletics would like to raise about $500 million of public capital in the offering.
As for what they’ll use this money for, we’ll have to wait for a registration statement. Many businesses use IPO capital to expand their offering or promote research and development.
PRO TIP: Before investing, find out how a company plans to use IPO funds. It’ll give you some insight into the offering’s risk level. Red flags might include paying off debt.
When is the Fabletics IPO date?
The general public awaits updates on the Fabletics IPO, including an S-1 registration statement that will provide a whole slew of financial and IPO-specific details to go off of.
As of late August, no Fabletics IPO date has been set. Following a public registration statement, investors will be able to determine when the company plans to go public, what price the executives plan to list the stock at, and how many shares they expect to sell.
However, we’re not entirely in the dark. Fabletics plans to partner with major underwriters Morgan Stanley, Goldman Sachs, Barclays, and Bank of America.
Risks and opportunities in a potential Fabletics IPO
Fabletics could be chiming in at the right time. Lately, business-to-consumer brands have been taking the public market by storm. From Oatly to Figs Inc., investors have definitely been receptive to companies with consumers—rather than other businesses—in mind.
Related: What to know about the 2021 Warby Parker IPO
The company is in major growth mode. “We’re living through a major shift in culture with the pandemic,” Fabletics senior VP Felix del Toro told reporters. Recently, the brand has expanded into resale, and it also just launched a loungewear line.
While the luxurious loungewear pull is a year late (2020, anyone?), it may not be a dollar short. The global loungewear market is expected to continue rising through 2026, according to Forbes.
The fact that celebrity Kate Hudson backs the brand could be both a risk and opportunity. On one hand, Hudson’s familiar face is a draw, especially for retail investors. On the other, celebrities can distract from the real nuts and bolts of a company.
In March, the SEC came forward with a warning about celebrity-backed tickers. “Celebrities, like anyone else, can be lured into participating in a risky investment or may be better able to sustain the risk of loss,” the SEC wrote in an alert. Granted, the SEC was focusing mostly on SPAC vehicles, which carry different risks than traditional IPOs.
On the surface, this IPO feels akin to that of Honest Co, which actress Jessica Alba founded. Honest Co stock lost nearly 60% of its value in the 3+ months following its IPO. For Hudson’s sake, let’s hope the Fabletics debut doesn’t follow the same swing-term trajectory. As the Fabletics S-1 comes into light, investors will be able to compare and contrast financials.
There’s one risk in the Fabletics IPO that is especially pressing for investors—especially those who take ESG (environmental, social, and governance) criteria seriously.
Related: Understanding ESG Investing: Environmental, Social, & Governance
In May, Time released an exclusive investigation about women working in factories that produce Fabletics apparel. The report says 38+ women claimed physical and sexual abuse and harassment.
The factory in question is a Taiwanese facility called Hippo Knitting and is based in the southern African country Lesotho.
On Fabletics’ behalf, the brand immediately halted its operational relationship with Hippo Knitting. “The top priority for Fabletics is the workers who are impacted, and we are committed to providing their full pay during the course of the investigation,” a Fabletics spokesperson wrote in an email. Hudson reported having no knowledge of the goings on beforehand, but many investors saw that as a cop-out.
Fabletics will surely have to hold itself accountable and clarify checks and balances as the IPO comes to light, if only to ease potential shareholders. In the impact investing era, it’s not enough to have a good product. Your product must have good roots, too.
Bottom line
Fabletics isn’t a bulletproof business, but it could be in a good position as it heads toward an IPO. With celebrity Kate Hudson as the face, there’s no denying the company will get the word out about the public offering. But will investors bite? Only time will tell.
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