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Jessica Alba’s Honest Co., Investors Raise $413 Million in IPO

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Crystal Tse and Katie Roof
·3 min read
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(Bloomberg) -- The Honest Co., the personal care brand co-founded by actress Jessica Alba, raised $413 million in an initial public offering priced within a marketed range.

The company and its shareholders on Tuesday sold about 25.8 million shares for $16 each, according to a statement confirming an earlier Bloomberg News report. The shares had been marketed for $14 to $17, with the company offering 6.5 million shares and existing investors selling 19.4 million.

The company has a market value at the IPO price of about $1.45 billion based on the outstanding shares listed in its filings with the U.S. Securities and Exchange Commission. Fully diluted to include employee stock options and restricted stock units, that value rises to more than $1.7 billion.

Founded in 2011, Honest has grown into a national brand and has partnerships with retail giants including Target Corp. and Amazon.com Inc. The Los Angeles-based company specializes in baby products such as diapers and wipes, which accounted for 63% of last year’s sales, as well as household cleaning supplies and personal care items.

Now the company’s chief creative officer, Alba owns 5.65 million shares. She didn’t plan to sell her shares in the offering, according to the filings. The share sale gives her a stake valued at about $90 million.

Investors selling some of their shares in the IPO included private equity firm L Catterton, Institutional Venture Partners, Lightspeed Venture Partners and General Catalyst, the filings show.

Childhood Ailments

Alba has said she sought to find products with fewer harsh chemicals following childhood struggles with allergies and asthma. She became particularly concerned about ingredients in baby products and said in a recent filing that she tried to appeal to lawmakers for chemical legislation reform.

Honest’s business touches on several trends that have become more prominent during the coronavirus pandemic, including a focus on wellness and elevated demand for cleaning products. Those have buoyed top-line results for household-goods companies such as Procter & Gamble Co., the maker of Pampers diapers and Tide laundry detergent.

Los Angeles-based Honest generated sales last year of about $301 million, a 28% increase over 2019. It lost $14.5 million in 2020.

Boom Fading

Already, though, the pandemic boom for consumer-products makers is starting to fade. P&G has acknowledged that rising costs are pressuring results, toilet paper maker Kimberly-Clark Corp. recently cut its earnings forecast and Clorox Co. last week missed Wall Street’s estimates for quarterly sales. In addition to shifting demand, manufacturers are grappling with higher commodity and freight costs.

Honest said in the filing that it’s working to manage disruptions to its supply chain, but it anticipates “sustained market turmoil” as a result of the pandemic and its economic impact. “If the disruptions caused by the Covid-19 pandemic continue for an extended period of time, our ability to meet the demands of our consumers may be materially impacted.”

The offering is being led by Morgan Stanley, JPMorgan Chase & Co. and Jefferies Financial Group Inc. The shares are expected to begin trading Wednesday on the Nasdaq Global Select Market under the symbol HNST.

(Updates with statement in second paragraph)

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