Eleven months ago, Jessica Alba's consumer packaged goods company, the Honest Company, went public. Prior to going public, bankers and analysts predicted it would list at $16 a share. It ended up debuting at $21 and ending its first day of trading at $23.
At $23 a share, the Honest Company's market cap was $2.7 billion. This was a truly impressive accomplishment considering the company’s up-and-down valuation history. Honest first achieved a $1 billion valuation after a private fund-raising round in 2014. A year later, a second round of funding upped the valuation to $1.7 billion. At this point, it was widely believed that Jessica still owned 20% of the company’s shares. That meant her stake was worth $340 million on paper.
The next few years were a bit rocky. In October 2017, Honest raised a "down-round," which is when you accept an investment at a lower-than-previous valuation. At this round, the company’s value was bumped back down to $1 billion. Still an impressive number, but where would it go from there?
Impact of Going Public
When the company went public with a $2.7 billion valuation in May 2021, insiders and previous investors must have been nothing short of ecstatic. And when the company debuted, we learned from official filings that Jessica owned 5.65 million shares. At $23 a share, on the first day of trading, she officially sported a pre-tax stake worth $130 million.
Unfortunately, the ecstasy did not last. As I type this article, HNST is trading at around $5.25 a share. That’s up slightly from an all-time low of $4.20 that was briefly hit on March 25. At $5.25 a share, the company’s market cap is $481 million and Jessica’s 5.65 million shares are worth $29.66 million, pre-tax.
The Rollercoaster of Valuation
The Honest Company has experienced significant fluctuations in its valuation. Initially achieving a $1 billion valuation in 2014, it saw a rise to $1.7 billion a year later. However, a down-round in 2017 brought it back down to $1 billion, raising questions about its future. The company’s eventual IPO at a $2.7 billion valuation was a moment of triumph, but the subsequent decline in share price reflects the volatility often seen in the consumer goods market.
- 2014: $1 billion valuation achieved.
- 2015: Valuation increased to $1.7 billion.
- 2017: Down-round reduced valuation back to $1 billion.
- 2021: IPO at $2.7 billion valuation.
Personal Investment Insights
And here’s where I’m going to throw you a curve-ball that will also serve as a necessary full disclosure: I actually bought some shares of HNST on March 7 for my retirement account. I have multiple friends who have recently had babies and they seem to be spending fortunes on Honest products (diapers, lotion, baby wipes). So I personally believe it’s undervalued based just on that anecdotal evidence. But please know that I’m not a stock expert or a financial advisor.
Time will tell if I’m right or wrong! For Jessica’s sake, I hope I’m right!
Key Takeaways
What You Will Learn
- Jessica Alba's Honest Company went public with a surprising valuation.
- The company's valuation history showcases significant volatility.
- Investing in consumer goods can be risky, as evidenced by the declining share price.
- Anecdotal evidence can influence personal investment decisions but should be taken with caution.
