US luxury fashion resale retailer The RealReal saw its shares skyrocket over 45 per cent following its initial public offering (IPO), as investors seek to cash in on its sustainability promise.
The young tech start-up, founded in 2011 by entrepreneur Julie Wainwright with an initial investment of just $100,000 (£79,000), raised $300 million (£235 million) during its flotation which initially valued the company at $1.6 billion (£1.26 billion).
On Friday, its 15 million shares opened at $28 and closed at $28.8, representing a 46.8 per cent increase on its IPO share price of $20.
The RealReal’s platform uses an algorithm to determine the price of secondhand luxury hangbags, watches and fashion items, employing over 100 product authenticators and pricing experts to ensure no fake items make it onto the platform.
Its algorithm takes into account a myriad of factors including brand, age, condition and item type to determine an accurate and fair sale price, of which the site will then take a cut.
Investors were drawn to the company thanks to its promise to encourage “circular fashion”, extending the shelf life of pricey fashion products, a model which its founder believes “Amazon couldn’t replicate”.
“We have a huge opportunity in front of us,” Wainwright said.
“Two-thirds of it’s outside the U.S. so at some point we’ll go overseas but not in the near term.
“You’re keeping things out of landfills and preventing items being melted down and energy applied. When you buy things of value, they have an afterlife, and they should recirculate in the economy. You’re helping the planet as you do that.”
The RealReal, which opened two physical stores last year to both collect and sell luxury items, now processes nearly 2 million orders per year.
Despite its successful IPO and significant investment, the company has never made a profit and posted a loss of $76 million on a turnover of $207 million last year.