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Unpacking the Allbirds IPO

Published by: Lucien Paulemil
July 2, 2022 4:22 pm

Allbirds is one of the few companies that is standing up against fast fashion and is instead trying to create their clothing in the most ecologically and environmentally friendly way possible.  This focus on sustainability has won them the respect of many, and that’s what makes it such a captivating proposition to consider their upcoming IPO and what it means for the industry as a whole.

What is Allbirds?

Allbirds is a shoe and clothing company that sells its products mostly through online channels.  Their design aesthetic focuses on clean, simple designs that are still comfortable and made from nature. It was started by New Zealander Tim Brown and an engineer and renewables expert by the name of Joey Zwillinger – and it has quickly become a global success.

The key differentiator that makes them special is the revolutionary wool material that they use for their footwear. It’s something that is unique, and it allowed them to create fully sustainable footwear that aligned with their values around sustainability.

Since those early beginnings, the company has expanded into all areas of clothing and now brings its values and mission to every aspect of the value chain.

The case for a Successful IPO

Allbirds has grown revenue consistently for a long period of time now, and they seem to be reaching that stage where an IPO seems inevitable. The company has created a brand that can stand on its own two feet and the fact that they focus so much on sustainability positions them well in a modern world that is taking those aspects more and more seriously.

They’ve also been able to achieve a level of ‘cool’ among young people that is incredibly hard to do. This bodes well for a future where they should be able to capitalize on their early momentum and scale their operations across the globe. In addition, there is a lot of potential that can still be unlocked by engaging with more brick-and-mortar opportunities. While online sales will likely remain their bread and butter, there might be room for a few flagship stores in high-status locations to cement their position in the minds of consumers. Doing this would require capital, and an IPO is critical to that outcome.

The Case Against the IPO

Looking at things from the other side, the biggest concern for potential investors is the fact that the company is still making losses. To fast-track their global expansion, they have been aggressively investing in their operations, and this means that they haven’t unlocked true profitability just yet. The unit economics should make sense theoretically, but it still needs to be proven in the marketplace. Sceptics worry that it might be yet another company that relies on growth to keep going and doesn’t pay enough attention to making individual items profitable.

This is compounded by the fact that their sustainability focus creates additional costs and concerns that must be factored into any long-term growth plans.  It’s extremely challenging to keep up with ESG values and maintain a competitive advantage at the same time. We’ve seen other ESG-heavy companies struggle to match their pre-IPO commitments as the scrutiny of public markets descends upon them, and so that’s an important thing to keep in mind for any potential investor.

Should You Invest in the Allbirds IPO?

The decision to invest in the Allbirds IPO seems to hinge on just a few factors:

  • Will the company be able to continue on its growth trajectory, unlocking new markets along the way?
  • Will the company be able to execute on a viable retail strategy that transcends the online store and creates new opportunities for customer acquisition?
  • Can the company translate its growing market share into a profitable enterprise that unlocks the inherent value?
  • Will the company maintain its ESG standards and be a shining light for sustainable clothing going forward?

If you believe that these things are achievable, then the IPO represents a great opportunity to invest in a clothing brand that cares about more than just profits. They are truly on a mission to reform the global clothing industry, and what makes them special is that they are not compromising on comfort or design aesthetic to do so. Their products are world-class and that’s not likely to change – so if they can execute on their plans, they’re well set to become a behemoth.

But that’s not going to come easy. A clothing IPO is notoriously difficult, and the additional scrutiny it will bring to the manufacturing process is something that could make or break the investment.  It remains to be seen whether they can weather that attention and still transition the business into a profitable one across all their different areas.

The fact that things could go either way makes it a fascinating proposition, and that’s why so many investors are excited to see what happens.  Watch this space.    

Download the ‘IPO Guide For 2022’ Here.

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