Warby Parker Direct Listing: What You Need to Know

Warby Parker Inc. (WRBY) is a direct-to-consumer eyewear company. It manufactures and sells designer-quality prescription eyeglasses, sunglasses, contacts, and related accessories, such as cases for glasses and lens-cleaning kits. The company offers eye exams, vision tests, and free home try-ons. It also runs a philanthropic program through which it distributes a pair of glasses to someone in need for each pair of glasses purchased by a customer.

Warby Parker’s growth has been financed thus far by a total of $535.5 million in venture capital raised in funding rounds from backers, including D1 Capital Partners and T. Rowe Price.

WRBY Direct Listing

Warby Parker went public via a direct listing, or direct public offering (DPO), on Sept. 29, 2021. It opened at $54.05, substantially above its $40 reference price.

It’s important to remember that a reference price for a direct listing is significantly different from an initial public offering (IPO) price, in which shares are sold to large institutional buyers before they broadly trade. A reference price is there to provide information for buyers in the market, rather than one at which buyers can purchase shares. The stock ended its first month on the market at $50 a share, roughly flat. This gives it a market valuation of $5.6 billion among its 111.5 million shares, which are divided into two share classes (92.5 million shares of Class A common stock and 19.0 million shares of Class B common stock).

Warby Parker originally filed for the listing of its existing outstanding shares of class A common stock on Aug. 24, 2021. Unlike an IPO, a direct listing is not underwritten by an investment bank and no new shares are created to be sold to the public. A direct listing is a less common route for a company to go public, but it is also significantly less costly.

Following the direct listing, Warby Parker’s co-founders and co-chief executive officers (CEOs), Neil Blumenthal and Dave Gilboa, now hold outstanding shares of class B common stock. They can exercise voting control over shares of class A common stock and will have approximately 48% of the voting power over the company’s capital stock, giving them significant influence and control over actions requiring the approval of stockholders.

An amendment to the original S-1 prospectus, submitted to the U.S. Securities and Exchange Commission (SEC) in September 2021, showed that approximately 92.5 million shares of Warby Parker’s class A common stock would be available for trading on Sept. 29, 2021. Those shares would be listed on the New York Stock Exchange (NYSE) under the ticker symbol WRBY, the amendment stated. There’s no estimate available regarding the total value of Warby Parker’s 92.5 million Class A common shares when they go public. Warby Parker didn’t receive any proceeds from the sale of the shares, only registered stockholders who chose to sell their shares.

Warby Parker, based in New York City, was launched in February 2010 and was co-founded by the current co-CEOs mentioned above: Blumenthal and Gilboa. The idea for the company was born out of the founders’ frustration with the high price of eyeglasses and the lack of online options for consumers. Blumenthal previously had been involved in social entrepreneurship programs to distribute glasses in low-income regions globally. Building on that knowledge, Warby Parker created a direct-to-consumer brand: The company designs glasses in the house, thus eliminating the costly middlemen, enabling it to offer quality glasses at affordable prices.

More than 11 years after its launch, Warby Parker today has developed a widely recognized brand. It’s known for offering eyewear directly to consumers online, via its mobile app, or at its 145 stores across the United States and Canada. The company sells designer-quality prescription glasses starting at $95, as well as sunglasses, contact lenses, and related accessories. It also offers eye exams, vision tests, and vision insurance.

Warby Parker’s Financials

Warby Parker provided recent financial results in its amended S-1 registration form, revealing net losses in fiscal 2020 and thus far in 2021. The company posted a net loss of $10.3 million even as net revenue surged 96.0% to $131.6 million in the second quarter (Q2) of its 2021 fiscal year (FY), which ended June 30, 2021. The Q2 net loss was smaller than the net loss of $12.8 million in the year-ago quarter. The company’s total book value, the difference between its assets and liabilities, was $285.6 million as of the end of Q2. Despite Warby Parker’s financial losses, the total cash and cash equivalents on its balance sheet at the end of Q2 were $260.7 million. That number was down about 17% versus the end of 2020.

Warby Parker generates most of its revenue from selling eyeglasses and sunglasses. Based on its annual results for FY 2020, as much as 95% of the company’s net revenue was generated from the sale of glasses, 2% from contacts, 1% from eye exams, and another 2% from eyewear accessories. The company posted a net loss of $55.9 million on net revenue of $393.7 million during the year ended Dec. 31, 2020.

The COVID-19 pandemic had a significant impact on Warby Parker’s business. The outbreak of the coronavirus and subsequent recommendations from government and health authorities in early 2020 prompted the company to close its retail stores in mid-March of 2020. It immediately commenced with a phased reopening of its stores to the public that lasted through to the end of the year. All of its retail stores were fully reopened at the end of 2020. Earlier this year, the company said it was on track to open an additional 35 stores. It was operating 135 stores when that number was reported in May 2021. The company had 145 stores in operation as of June 30, 2021.

Due to the store closures, customers were forced to make purchases via Warby Parker’s e-commerce channels. Before the pandemic, the company generated 65% of its net revenue from retail stores and the remaining 35% online in FY 2019. In FY 2020, the period most affected by the pandemic, revenue generated from e-commerce channels increased sharply to 60% of net revenue. Through the first six months of FY 2021, there has been a rebalancing of the revenue mix, with each channel generating 50% of net revenue, respectively.

One of the company’s key metrics that investors should focus on is “active customers.” This metric is defined as a unique customer, or a household using a single account, that has made at least one purchase in the last 12 months. Warby Parker uses the metric to gauge the reach of its stores and digital platforms, as well as its brand awareness. The company had just under 2.1 million active customers as of June 30, 2021. That number was up 20.2% year over year (YOY) and has increased 118.9% since the end of the first quarter (Q1) of FY 2017.

^{Source: Amendment No. 1 to Form S-1 for Warby Parker Inc.}

How Much Is Warby Parker Worth?

According to the online public database Crunchbase, Warby Parker has raised a total of $535.5 million from investors over nine rounds of funding. The company raised a total of $120 million in its most recent funding round in August 2020, giving it a valuation of $3 billion. The lead investor out of a total of four in that series G round was D1 Capital Partners. Some sources say the company actually raised $245 million in its latest funding round, including the $125 million raised in a series F round led by Durable Capital Partners earlier in 2020.

Warby Parker also raised $75 million in a series E round in March 2018, valuing the company at $1.7 billion to $1.8 billion. The lead investor during that round was T. Rowe Price. Amounts raised earlier include: $100 million in a series D round in April 2015; $60 million in a series C round in December 2013; $41.5 million in a series B round in September 2012; $12 million and $1.5 million in series A rounds in September and July of 2011, respectively; and $500,000 in a debt financing round in October 2010.

As of Oct. 1, 2021, Warby Parker trades on the NYSE for $54 a share, giving it a valuation of $6 billion.

Warby Parker’s Key Competitors

Two of Warby Parker’s main competitors are France-based EssilorLuxottica SA (EL.PA) and VSP, both of which are integrated optical companies operating multiple brands. EssilorLuxottica is a publicly-traded global optics company that designs, manufactures, and distributes ophthalmic lenses, frames, and sunglasses. EssilorLuxottica had 42% of the global corrective lens market as of 2019, the latest available data. Its stock is up 55.3% over the past year but has pulled back about 2.0% over the past five days. VSP is a private company offering eye care and eyewear products globally. Warby Parker also faces competition from independent ophthalmologists, optometrists, and opticians offering similar products and services.

The Bottom Line

Warby Parker went public via direct listing on Sept. 29, 2021. It was priced at $54.05 at the beginning of trading and ended the week flat. This price substantially exceeded the reference price of $40 a share and gives it a valuation of just over $6 billion.