Allbirds Inc. readies to launch the first 'sustainable’ IPO on Wall Street

Sustainable footwear brand Allbirds Inc. announced Tuesday it’s intention to float through a “sustainable” initial public offering. The deal’s moniker requires the company to adhere to certain environmental, social and governance (ESG) standards, making this initial public offering (IPO) of shares, a first of a kind.

The Californian shoe maker is listing its stock in a way that holds them accountable, maintaining a minimum ESG rating, implementing “best practices” towards climate change and making “commitments to make meaningful progress on important ESG matters”, according to a regulatory filing.

Creating a new category of sustainable IPOs

“We hope to help pioneer a framework for companies to conduct what we are calling a sustainable public equity offering . . . Our vision is that Allbirds’ initial public offering will lay the groundwork that can be used by other companies for future SPOs,” said the company’s leadership in the filing.

Allbirds’ shoes are produced using naturally derived materials and the company claims its supply chain has been carbon neutral since 2019. “We estimate that a standard pair of sneakers results in a carbon footprint of 14.1 kg of CO2e. Today, through our use of renewable, natural materials and responsible manufacturing, the average pair of Allbirds shoes has a carbon footprint that is 30 percent less than our estimated carbon footprint for a standard pair of sneakers, and we offset the entirety of the rest to provide our customers with carbon-neutral products,” as highlighted by the company in their floating documents.

Regarding their rationale to launch this “pioneering public sustainable equity offering”, Allbirds highlights that they “believe in the power of selective industry collaboration to accelerate progress” and refer to their partnership with adidas to unveil the world’s lowest carbon footprint running shoe at 2.94kg of CO2e in May 2021. “This partnership, as well as our decision to open up the carbon-negative, green EVA used to make SweetFoam, and our carbon footprint methodology demonstrates our ability to scale our impact to the broader industry and beyond, while extending our brand’s leadership as a sustainability innovator.”

The company’s filing leaned heavily on its ESG credentials, and noted that environmental impact and brand trust were increasingly important factors for its target buyers: Generation Z and millennial consumers.

Allbirds’ IPO details

The company was founded in 2015 by co-CEOs Joseph Zwillinger and Timothy Brownand and raised funds for the last time a year ago, when it secured 100 million dollars in a Series E funding and reached a 1 billion dollar valuation. Allbirds counts T Rowe Price, Franklin Templeton and Baillie Gifford as its financial backers.

Allbirds has applied to list its Class A common stock on the Nasdaq exchange under the ticker symbol BIRD.

The offering is being led by Morgan Stanley, JPMorgan Chase & Co. and Bank of America Corp. Allbirds has listed the size of the offering as 100 million dollars and is seeking to be valued at 2 billion dollars or more in a listing as reported by Bloomberg News in June.

As a B-Corp, the footwear company’s board is legally bound to balance profit and purpose and publicly share an impact report on how it’s improving society or the environment. In this regard, Allbirds has laid out 19 criteria under six categories of how to make an equity offering sustainable and pledged to follow them. Some of the criteria in its listing prospectus include disclosing a review at IPO while other efforts have to be reported annually, including their work on establishing a human rights policy, commitment to employee diversity and requiring suppliers to address environmental issues.

Allbirds also said that investors’ ESG profiles contribute to the selection on which funds get allocated shares in the IPO process.

Allbirds expects to remain unprofitable after floating

As revealed in the documents filed with the stock market authority to request its stock’s listing, Allbirds has lost money since its creation and continues to expect that to be the case in the foreseeable future.

Online sales revenue at the company grew 74 percent from 126 million dollar in 2018 to 219.3 million in 2020. Indeed, digital sales totalled 194.6 million dollars in 2020, representing 89 percent of total sales. Earnings before tax grew exponentially, from 1.3 million dollars in 2019 to 15.4 million dollar a year after. Despite the strong growth, Allbirds hasn’t been profitable yet: Net losses amounted to 40.4 million dollars between 2019 and 2020. According to documents filed with the Securities and Exchange Commission, for the six-month period ended June 30, Allbirds reported a loss of 21.1 million dollars. The retailer says it expects to continue to be loss-making for the foreseeable future.

Looking ahead, Allbirds plans to make a significant push into physical stores (it currently manages 27 stores directly) as it approaches the “early phase of a ramp towards hundreds of potential locations.” Per their IPO’s filing, new stores had contributed to “increased brand awareness and web traffic”. Sales at physical stores made up 11 percent of the company’s revenue and fell 17 percent from 2019 to 2020.

Image: Albirds Inc. IPO Filing