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Philip Krim, co-founder and CEO of Casper, poses for a portrait on August 2, 2017 in New York City. Most people know Casper as a popular direct-to-consumer bed-in-a-box company, but it is pitching itself as a “sleep economy” leader in its IPO marketing.

Benjamin Lowy | Getty Images

Casper shares surged nearly 30% following the online mattress maker’s IPO Thursday morning, opening at $14.50.

Casper had priced its initial public offering at $12 per share, or the very low end of its target range, Wednesday evening. The disappointing pricing meant the company would have a market value of roughly $500 million, excluding its underwriters’ allotment.

Casper at one point, as a private business, was valued at $1.1 billion, giving it so-called unicorn status. But like many Silicon Valley-backed start-ups looking to go public, the company has faced scrutiny for being unprofitable and for its high costs to acquire new customers, and keep them.

The mattress market in the U.S. has also showed signs of slowing down, analysts say. And Casper’s IPO comes on the heels of a WeWork IPO fiasco in 2019, which put a dark cloud over the start-up market. Casper’s debut is another sign that going public as an unprofitable company can be a disaster.

Shares, trading on the New York Stock Exchange under the symbol “CSPR,” were recently up about 27% at $15.30.

Casper slashed its target price range from $17 to $19 a share, to $12 to $13 a share, Wednesday morning, ahead of the IPO.

The company is still losing money, giving analysts reason to question if Casper will ever be profitable. In the nine months ended Sept. 30, Casper reported a net loss of $67.3 million and revenue of $312.3 million. While revenue increased 20% year over year, its losses widened a little under 5%.

“Casper now is opening its own stores, and that raises expenses and capital needs,” said Erik Gordon, a professor at University of Michigan’s Ross School of Business. “It is selling through existing retailers, and that shrinks margins. … A year from now, its shares are more likely to half their opening price than twice the price.”

The company launched in 2014 and was one of the pioneers of the mattress-in-a-box trend. It is now expanding its store fleet, and has 60 of them, with goals to have upwards of 200. It sells its mattresses and pillows in places like Costco and on Amazon. Casper has pitched investors on building its business beyond just mattresses and around a global “sleep economy.”

The New York-based company’s investors include retailer Target, actor Leonardo DiCaprio and investment firms Lerer Hippeau Ventures, IVP and NEA.

These investors could be in the red based on Casper’s new valuation. Take Target. It was reportedly in talks to buy the mattress maker in 2017 for $1 billion, but later invested $80 million in Casper. It currently sells Casper mattresses and pillows in its stores and on Target.com.

At the midpoint of Casper’s initial $17 to $19 IPO range, the pricing represented a 37% drop from Casper’s share price at the time Target became an investor in the start-up’s Series C fundraising in 2017, CNBC previously reported.

Still, there have been much bigger paper losses involving major corporations investing in high-growth start-ups, including SoftBank’s WeWork investment, and Altria’s investment in Juul, which last month was written down by $4 billion.

Casper has said it plans to use the proceeds from its IPO for working capital, funding growth and other general corporate purposes, according to regulatory filings.

Some of Casper’s rivals today include Purple, Nectar, Serta Simmons’ Tuft & Needle, Walmart’s Allswell mattress brand and Eight Sleep. There are dozens in the space. Even Amazon has its own mattress brand.

Casper was named to CNBC’s Disruptor 50 list in 2019.

– CNBC’s Eric Rosenbaum contributed to this reporting.

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