Ethical natural beauty and baby product company The Honest Co. saw its shares jump 44% in its trading debut, as investors show optimism over the rising conscious consumerism trend. The brand, co-founded by Jessica Alba, saw its market value rise to US$2.1 billion at the end of trading.
Shares of The Honest Co. soared 44% on Nasdaq in its IPO on Wednesday (May 5), selling for US$16 at opening and closing at US$23 to give the firm a market value of US$2.1 billion, up from its initial US$1.92 billion valuation prior to going public. When accounting for employee stock options and restricted stock units, the company is valued around US$2.5 billion. Honest is listed on the Nasdaq stock exchange under the ticker symbol HNST.
On the day’s share sale, the company and its existing stockholders raised US$413 million, allowing the company to continue growing its “clean lifestyle” platform. Since its founding in 2011, Honest has expanded into a major U.S. brand with Target and Amazon partnerships, and has seen its sales surge amid the rising ethical and conscious consumerism trend, and the shift towards wellness and health.
We hit on all of those things that are very important to not just the millennials, but the younger generation that are driving really the consumer’s behavior to a more conscious life.Jessica Alba, Co-Founder & CCO, The Honest Co.
It was co-founded by actress-turned-entrepreneur Jessica Alba, who became increasingly concerned about the ingredients in personal care and baby care products. Commenting on the successful IPO, the Hollywood star says she will continue to drive the company’s growth as chief creative officer and director.
“I have three kids, I would say Honest is my fourth kid,” said Alba. “You should have products that you can trust and across the board we hit on all of those things that are very important to not just the millennials, but the younger generation that are driving really the consumer’s behavior to a more conscious life.”
Honest pushed ahead with its IPO without going for the popular SPAC merger route. According to Bloomberg, general partner at Institutional Venture Partners and Honest board member Eric Liaw said the the company “just decided it probably wasn’t the right thing for us” and noted that “the long-discussed IPO was made possible in part because the company had become profitable (sic)” thanks to its early-mover advantage in multiple consumer trends, from health and wellness to sustainability and ethical sourcing – of which Gen Zs and millennials are at the forefront of driving.
Liaw added that “the vision and the mission of the company 100% came from Jessica.[…] We wouldn’t be here without her”.
Research undertaken by Piper Sandler in the first quarter of 2021 showed that social and environmental values are becoming top of mind considerations for Gen Zs when making purchasing decisions, reconfirming previous data indicating that the younger generation are willing to spend more on value-led brands and sustainable goods more than ever before.
We’re kind of right at that sweet spot when it comes to that consumer segment.Nick Vlahos, CEO, The Honest Co.
“They care about sustainability as well as social responsibility,” said Honest’s CEO Nick Vlahos. “And we’re kind of right at that sweet spot when it comes to that consumer segment.”
In 2020, the company recorded a 28% year-on-year increase in sales to reach US$301 million, with US$14.5 million in losses (approx. half of its 2019 losses). To date it has not yet turned a profit.
Looking ahead, Vlahos said that he believes in growing its existing brands rather than acquiring new ones , and will be continuing to grapple with the “sustained market turmoil” as a result of Covid-19 disruptions.
In the interview, Alba compared the next stage of Honest post-IPO to a phase in motherhood.
“You put so much into your birth plan and essentially when you’re a mom and you have the kids then you understand, especially me after having three, that the real work is raising those kids,” commented Alba.
“That’s when you’re really getting started and that’s kind of how I feel today.”
Lead image courtesy of The Honest Co.