In many cases, the greatest innovations owe their existence to a personal search for a solution. That’s exactly the situation with The Honest Company. Founder Jessica Alba, a Hollywood A-lister, initially looked for safe, environmentally friendly and affordable care products for her own children. Discovering huge safety gaps in the industry, Alba lobbied for greater government oversight.
Eventually, she took her newfound passion to the commercial market, partnering with entrepreneur Brian Lee to deliver safe childcare products for everyday households. Given the huge following for sustainable products, The Honest Company’s initial public offering (IPO) was a winner and the stock continues to perform well today.
When is The Honest Company IPO Date?
The Honest Company IPO’d on May 4, 2021 at $16 per share, raising $412.8 million.
The Honest Company Financial History
Under its filing, The Honest Company sought a $100 million valuation. At the time, it did not reveal how many shares it will offer nor their price range. But you should be aware that the $100 million tag may be a placeholder that may change as more information comes into view.
According to a Bloomberg report in January 2021, Honest could end up commanding a market capitalization of $2 billion. Though that might seem rich at first, the company has the financial substance to back up this premium.
However, rumors have long circulated that the company founders wanted to go public. According to reports, co-founder Brian Lee discussed taking the company to the capital market since 2014. Other information suggested that Honest was close to filing for an IPO in 2016 but plans fell through.
From its S-1 filing, Honest delivered revenue of $300.5 million for 2020, which was up almost 28% from 2019’s top-line sales tally of $235.6 million. Further, the company pared down its net loss to $14.5 million from a loss of $31 million.
Interestingly, Honest incurred a relatively modest increase of 13% in total operating expenses between 2019 and 2020, despite the sizable jump in revenue. Marketing spend represented the lion’s share of operating expenses as the organization competed in a tough, COVID-19 impacted retail environment.
Longer term, though, this dynamic suggests that Honest has predictable cost outlays.
The Honest Company Potential
While no one can guarantee the profitability of a public market debut, The Honest Company checks off multiple boxes regarding what young investors look for in an organization. First, as countless studies have proven, millennials are willing to pay more for sustainable products. Add in that Honest’s products are geared for child safety and you have a huge sentiment-based catalyst, if not a fundamental one.
Further, the company’s e-commerce footprint and subscription model have been fortuitously effective during the COVID-19 lockdowns last year. By having diapers delivered directly to customers, they avoided the frustration of fighting other parents for essential childcare products. As we slowly navigate out of the pandemic, the handiness of this subscription service may stick for many members.
Speaking of the public health crisis, pent-up demand for family planning could see a baby boom, which of course would bode well for HNST stock over the long run.
Finally, The Honest Company enjoyed a successful run in the private equity funding space, raising $503 million since September 2011. Notably, the firm raised $200 million on June 7, 2018, with L Catterton as the lead investor.
How to Buy The Honest Company (HNST) Stock
If you know how to buy stocks, the process of buying shares on their debut is identical. You can review the key points below.
- Pick a brokerage.
Before any securities can change hands, you must first pick a brokerage. Prior to the introduction of mobile investing and trading platforms, brokerage services were fairly pricey. But thanks to the increased competition, many powerful incentives, such as commission-free trading are standard across the board.
Therefore, you should select a broker that fits with your lifestyle and investing acumen goals. For instance, if you’re waist deep in a career that you love, then a largely hands-free mobile trading app may be perfect for your needs. On the other end, if you want to grow in your trading skills, then you should consider a more robust platform. - Decide how many shares you want.
Deciding your share count is important because it determines your profitability potential. Obviously, if you only buy a handful of shares, an uptick won’t make that much of an impact to your portfolio.
Whatever is the magic number for you, make sure you think about it before you start trading. A good tip is to write down your desired share count and stick to the strategy. You want to make rational, well-reasoned decisions in the stock market, not emotional ones. - Choose your order type.
Due to constantly fluctuating prices in the market, you must choose a specific order type to adjust for the variance. Additionally, please note the following key concepts.
• Bid: The bid is the maximum price a buyer will offer for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the minimum price that a seller will take. It is always higher than the bid.
• Spread: The bid-ask spread is simply the difference between the bid and ask price. Significantly, the spread represents profitability for market makers, who temporarily absorb risk on their books as they acquire shares for eventual distribution to buyers (investors). Also, the spread indicates liquidity. Narrower spreads (low risk) suggest higher liquidity while wider spreads (high risk) imply lower liquidity.
• Limit order: To execute a transaction at an exact price, use a limit order. Be aware that the downside for this order type is that no guarantee exists that your target stock will reach the predetermined price, which can leave your limit order hanging unfulfilled.
• Market order: To guarantee yourself a position (in a liquid stock), you can use a market order, which fulfills at the next available price. Buy orders will execute at the ask while sell orders will execute on the bid. Also, you might not be able to use market orders in illiquid stocks.
• Stop-loss order: For downside protection, you can use a stop-loss order, which will automatically exit your holdings at either a predetermined price or the next available price. In a gap-down session where the opening price is much lower than the prior day’s close, stop-loss orders will fulfill at a much lower-than-anticipated price.
• Stop-limit order: To prevent such surprises, you can use a stop-limit order, which will only execute at a predetermined price. However, you run the risk of leaving your stop-limit order hanging. - Execute your trade.
To execute your trade, follow these steps for a market order:
• Select action type (buy or sell).
• Enter the shares you want to acquire (or sell).
• Hit the buy (or sell) button.
A limit order follows the same process, with the obvious exception that you must enter your desired execution price.
Best Online Stockbrokers
Below is a list of best brokers for your consideration.
- Best For:Active and Global TradersVIEW PROS & CONS:Securely through Interactive Brokers’ website
- Best For:Global Broker for Short SellingVIEW PROS & CONS:securely through TradeZero's website
An Honestly Good Opportunity
By solving a critical problem that parents of young children face daily, The Honest Company positioned itself as a leader in holistic, sustainable childcare products. Further, Honest stock appeals to young investors coming of age as they take environmental and social concerns much more seriously than prior generations. Finally, the company’s subscription service is hugely convenient and relevant, attracting big league attention from venture capitalists.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.