Olaplex Holdings, the science-enabled, technology-driven hair care company, today listed on the Nasdaq
The stock opened at $25 and rose as high as $26.09 at mid-day. In afternoon trading, shares traded at $24.10, a $3.10 premium above the offer price, giving Olaplex a valuation of $15.6 billion.
Olaplex earlier this week had planned to offer 67 million shares at $17 to $19. The IPO had initially been priced last week between $14 and $16 per share.
The company raised $1.5 billion with lead underwriters Goldman Sachs
President, CEO, and director JuE Wong told me that the IPO will expand brand awareness of Olaplex at a time when consumers are thinking less about value in terms of price, but rather in terms of performance.
“Hair care as a beauty category has always been a little bit of a stepchild,” Wong said. “Through the pandemic, it really had an opportunity to shine. Today, we see hair care almost like skincare with the ritualization of haircare. Women are willing to pay a premium.”
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The IPO will give Olaplex the ability to explore options for new products. “We’ll look into everything,” Wong said. “We have a transformation team to look and help us decide where we can play and win. We have so much headroom and runway with hair care that we need to not squander the equity that we have. We want to be very disciplined and focused in hair care.”
Olaplex paved the way for a new category of hair care called bond-building, which is the process of protecting, strengthening and rebuilding broken bonds in the hair during and after hair services. The brand’s products have an active, patent-protected ingredient that works on a molecular level to protect and repair hair from damage.
The company said that 70% of consumers have experienced one of the following: hair loss, damage, coarseness, thinness, frizz, or dryness. Olaplex helps consumers address many of these haircare concerns with its patented Bond Building Hair Treatment, Hair Perfector and Bond Intense Moisture Mask.
One area that’s top of mind for Wong is the scalp. “If you think about skin care for the hair, the scalp is extension of your skin. The ability to unlock scalp care is rejuvenation. There’s a huge white space.”
There’s also plenty of runway in the biggest hair care category, the cleansing segment or shampoos and conditioners. “We have only two skus in that area at the moment,” Wong said. “There’s so much for us to be able to grow. We have a clear strategic cadence of launching three to four new products through 2024. If you look at 2021 launch cadence, we launched three professional products.
“What will be critical for us is to manage expectations and look to long term growth to add value for our shareholders,” Wong said. “This is the reason why we’re so committed to doing well with hair care, because it’s our core competence.”
The strength of Olaplex’s business model and ability to scale has created a compelling financial profile characterized by revenue growth and strong profitability over the past two years the company said, noting that net sales increased from $148.2 million in 2019 to $282.3 million in 2020, representing a 90% increase. The company generated net income of $49.4 million on $152.1 million in net sales during its most recent quarter ended June 30, 2021.
Olaplex’s distribution includes professional and direct-to-consumer channels. It is also sold at specialty retailers such as Sephora, Blue Mercury, Space NK and Nordstrom
Olaplex has room to grow internationally, which accounts for 44 percent of its business. “Where we are at the moment, we can continue to scale and grow the existing international markets and use the U.S. as the playbook before we extend further into other countries. Laying our foothold and establishing our credibility is going to be critical.”
The company also wants to get credit for its environmental actions. Olaplex in 2014 made a strategic decision not to add secondary packaging to its retail products, wherever possible. “Being carbon negative is our mantra,” Wong said. “We’re committed to our environmental footprint. We’ll save 23 million pounds of greenhouse gases from being emitted, 27 million gallons of water from being wasted and 29,000 trees from being deforested.”