“The RealReal has made a modest profit selling luxury name brand items secondhand, including apparel from such big names as Gucci and Louis Vuitton. Even so, the company still hasn’t gone through with a promise to go public on the market. Their IPO has been delayed, as private fundraising efforts endeavored to raise more capital. Past efforts earned the company $170 million in capital in the last seven years, but the company still remains private.
Now, The RealReal’s CEO Julie Wainwright is again promising to take the company public, after a new fundraising project helps to earn an additional $100 million in capital. While some may be beginning to doubt if The RealReal will ever go through with their initial public offering, there may be some good reasons for both the delay and for the additional round of fundraising projects.
One concern is that The RealReal executives feel uncertain that their current condition will appeal to investors. If that’s the case, they may be holding off on the IPO, until they can present a more solid offering. Additionally, Wainwright may feel her company needs more time to establish itself. Raising capital to market The RealReal and expand the business may help prove it has the kind of staying power that will appeal to public investment groups.
The latter motivation for keeping the company private may be closer to the truth. If Wainwright and her executives are seeing a broader market for second-hand luxury items than they had expected, they may be holding off, until the company can expand a little more. If growth is expected, it may be wiser to hold off until The RealReal can offer a more promising outlook and ask for a higher price for its public shares.
The RealReal works much like a consignment store. Sellers ship their used items to the store, which then turns around and sells the items to consumers. When an item is bought, the money paid for the item is divided between The RealReal and the original seller. The original seller usually receives 50-60% of the sale price, which serves as an incentive to attract more sellers with top quality used merchandise to sell. Additionally, The RealReal protects consumers by authenticating each item. This helps ensure fakes and forgeries rarely make it to the buyer.”