(RENT) starts trading on Nasdaq

Rent the Runway shares began trading Wednesday at $23 a share, or 9% above their initial public offering price of $21.

That gave the fashion rental platform a fully diluted valuation of about $1.7 billion. The stock has continued to climb on its first market debut, having recently risen more than 11%.

On Tuesday, Rent the Runway’s initial public offering was priced at the upper end of the expected range. It sold 17 million shares for $21 a share, after marketing 15 million shares for between $18 and $21.

The list comes on the heels of eyeglass maker Warby Parker’s public appearance, and comes ahead of the expected IPO of sneaker-selling company Allbirds. There has been a wave of trendy, investor-backed retailers testing the appetites of Wall Street investors.

Founded in 2008, Rent the Runway is in the midst of a comeback after demand for its apparel subscription service in 2020. Last year, its valuation shrank to nearly $750 million as the pandemic affected Rent the Runway’s ability to attract users.

The number of active Runway rental subscribers in 2020 has dropped to about 55,000, from more than 133,000 a year ago. Revenue tumbled 39% to $157.5 million. While its net loss expanded to $171.1 million from $153.9 million in 2019.

According to CEO Jennifer Hyman, the health crisis ultimately helped make her business more resilient.

“If anything, this pandemic has pushed us even more as consumers to share models and value experiences over ownership,” Hyman said in an interview with CNBC’s Squawk Box. “We’ve seen that in our client base.”

Rent the Runway, which describes itself as a “closet in the cloud,” had to get creative to stay afloat, when few consumers were looking for clothes to wear outside the home. They closed their stores and overhauled their subscription plans, which led to a discontinuation of unlimited choice. It also entered the resale market, allowing consumers to shop without a membership.

“It’s a great path for new customers to sign up,” Hyman said of the resale option. “It’s exactly the way we look at the special event rental business. … It’s a way of introducing a new client to how valuable our group is and how easy it is to come to Rent the Runway.”

Now, the company sees that its growth isn’t entirely dependent on women returning to offices.

“The women didn’t have to go back to the office to go back to Rent the Runway,” Hyman said. “So when women go back to the office, even if it’s just a few days a week, or they go back to a party, it’s just an improvement at work.”

Hyman added that ninety percent of the company’s customers continue to work from home, but subscriber levels are rising.

Return of subscribers

Instead, returning to social events like weddings, celebrations, and birthdays helps Rent the Runway’s recovery.

The company counted nearly 98,000 active subscribers in the six months ending July 31, up from about 54,000 in the same period in 2020. By September, the number of active subscribers had grown to 112,000, according to a recent stock filing.

Today, subscribers account for more than 80% of Rent the Runway’s revenue. As an example of one of the subscription options, a subscriber can rent eight items per month at a monthly price of $99 for the first two months and then $135 per month thereafter. Rent the Runway offers options from over 700 brands.

“It’s about renting a coat to walk around your neighborhood, or getting dressed to sit around your house…and then going out to dinner with a friend,” Hyman said in a phone interview. “As we expanded these formations, we saw them interact with us on more days of the year.”

The Wall Street IPO also provides another yardstick for investor appetite for the clothing rental business. Rent the Runway joins other listed companies Poshmark, The RealReal and ThredUp, which all sell used clothing and other accessories.

According to Hyman, Rent the Runway plans to use the capital raised in its inception to pursue expansion opportunities, including international growth and launch into new classes.

The IPO was led by Goldman Sachs, Morgan Stanley and Barclays.

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