Casper Will Recuperate With Private Equity After A 70% Plunge In Its Stock Price

It’s been a big autumn for public debuts in the direct-to-consumer space. Warby Parker, which might be more synonymous than any other company with the rise of the DTC model, went public through a direct listing in September. Rent the Runway conducted an IPO in October. Allbirds followed suit in November.

Casper Sleep beat them all to the punch: It went public early last year. Instead, this week brought a different type of deal for the DTC brand that pioneered the idea of putting a mattress in a box.

Did somebody leave $300 million under the mattress?


Casper’s IPO in February 2020 was underwhelming, to say the least. At the time, CNN described it as “officially a disaster.” It’s only been downhill from there. Casper has struggled mightily as a public company, continuing to hemorrhage cash even as the broader mattress market has boomed amid the pandemic. Its stock price has declined more than 70% since early June. So, this week, Casper decided to return to the private market with an agreement to sell itself to consumer-focused private equity firm Durational Capital Management for $6.90 per share, or a little less than $300 million.

That represents a 94% premium to Casper’s stock price before the deal was announced. It’s an impressive vote of confidence from Durational Capital. But it also a far cry from the $1.1 billion valuation that venture capitalists bestowed on Casper not so long ago, in April 2019. The price is a sign of just how far the company’s star has fallen in the two-and-a-half years since—and of the difficulties facing so many DTC companies as the industry struggles to live up to its disruptive dreams.

Casper was founded in 2014 to shake up the mattress industry with a streamlined model and the promise that all consumers needed was its “one perfect mattress.” It quickly became a hot commodity among venture capitalists. By 2015, Casper was valued at more than $500 million. In 2017, it pulled in $170 million in new funding at a $920 million, vaulting itself into the realm of the DTC elite.

In the process, Casper raised capital from some of the biggest names in VC: Norwest Venture Partners, Lerer Hippeau, IVP, NEA. And it also courted a cadre of celebrity investors who chose to chip in some cash in exchange for lending Casper their cache. Adam Levine, Leonardo DiCaprio, Shaun White, 50 Cent, Ashton Kutcher and Kyrie Irving all own stakes in the company.

Those celebrity investors were perhaps as much a marketing move as a source of significant cash. In many ways, marketing was key to the company’s rise. When Casper first got up and running, the DTC industry was much less crowded, and VCs were very optimistic. That allowed it raise tons of funding and flood the market with millennial-targeted advertising to quickly build brand recognition. Casper was also one of the first major DTC brands to begin opening physical locations. It was a retail version of blitzscaling, the same go-go ethos that drove Uber and so many other startups in the early unicorn era.

But things have changed. These days, there’s more competition from other upstarts with the same model, driving up the cost of advertising. Established mattress brands are copying Casper’s best ideas. And profitability remains out of reach: Casper has lost money in every quarter as a public company, with a net loss of $80 million through the first nine months of this year.

Casper was one of several companies trying something similar in the mattress market. These days, few are thriving. Tuft & Needle got out of the race early, selling itself to Serta Simmons in 2018 for $500 million. Purple Innovation, which went public through a SPAC merger in 2018, has seen its stock price slip more than 60% so far this year. In October, Cerberus Capital Management acquired Brooklyn Bedding and Helix Sleep and merged the two former competitors. Leesa hasn’t raised funding since 2019.

There are parallels between the story of Casper and the tale of Blue Apron. Both were direct-to-consumer companies that rode a wave of early investor optimism and podcast advertising to huge valuations and impressive brand recognition. But both were also caught in a crowded field of competitors. And in the end, for both, the business model just didn’t work—at least not in a way that has pleased public investors.

Now, Durational Capital will have a chance to turn things around. But first, the firm’s executives should get a good night’s sleep.