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Summary
Recent IPO was priced at the middle of the range ($18/share), opened at $21/share, and was valued at ~$725 million.
The company is a food and beverage company (F&B) that’s seen wild success from its refrigerated/cold-pressed pouches and newly launched kids’ and baby snacks.
The company has seen exponential net sales growth (CAGR of 64.4%) since 2018 as it has rapidly expanded its products to >20,000 retail locations.
IPO proceeds have eliminated all debt and converted all debt/preferreds to equity → clean balance sheet.
The company seems priced for perfection, and we see little upside from here unless management shows how they’ll be able to reach the next stage of growth.
Gross margins are already at, or near, those of more mature F&B companies, which suggests that there is little upside for GM expansion over the coming years.
The company hasn’t been profitable, and financials + their own callouts suggest that further capital raises will be necessary → dive back into debt or be dilutive with equity?
Not the biggest fan of being dependent on a celebrity spokesperson (Jennifer Garner) to drive brand awareness, along with her seemingly large compensation package as a co-founder.
We’re eager to learn more from their first earnings release on March 12th, and are confident that it will add clarity on which direction this company’s stock price will be moving.
Disclaimer: At the time of publishing this report, Cedar Grove Capital Management (CGCM) does not have a position in Once Upon A Farm (OFRM).
To look at our previous work on either IPOs or Shorts, click the link here to access our table of contents.
With that, let’s get started.
Context
When we’ve looked at IPOs of the past, we’re all too familiar with how the process goes. Having been an investment banker at Merrill Lynch in a past life, we understand what it takes to get a company to go public, and why sell-side bankers pick and choose to display certain metrics, KPIs, or verbiage in the S-1 in order to make the company appear better than it actually is.
While this is obviously not always the case, more often than not, S-1s are designed to loop in investors at the start with glitz and glam while being limited with information due to regulatory rules.
This is why we like looking at IPOs, as we find more opportunities for our short book than our long book. Take a look at the performance of the IPOs we’ve written about in the past and the performance of each just 1 year out.
Note: All companies’ 1-Year Performance is measured 1 year from either the report date or the IPO date. GLOO is the only company whose “performance” is through 3.5.26
Not perfect, but pretty up there. (Will remind everyone that CAVA eventually came back down to Earth).
When it came to looking at Once Upon A Farm (OFRM), we immediately got flashbacks to The Honest Company (HNST) IPO in 2021. Similar to OFRM, HNST was co-founded by a celebrity actress (Jessica Alba), and was offering premium baby products that were organic and excluded a lot of harmful chemicals - the premise was being honest about the products that you use, hence, “The Honest Company.”
We ended up shorting that company after the IPO due to reasons you can read about here (free). So, it’s not hard for us to immediately make the same connection to OFRM, considering it’s basically doing the same thing, but instead of various baby care and cleaning products, OFRM has set its eyes on various kids’ and baby snacks (CPG - HNST vs F&B - OFRM).
Below, we’re going to share our notes on their recent IPO/S-1 and our thoughts on what could be in store for the company ahead of announcing their first earnings release as a public company on March 12th, after the bell.
IPO Terms
Pricing | $17 - $19 (Priced at $18 and opened at $21) |
|---|---|
Shares Offered | Company: 7,631,537 Selling Shareholders: 3,365,672 |
Shares Outstanding Post Offering / Float | 40,231,814 / 10,997,209 |
Proceeds | Gross: $197,949,762 Net to Co: $127,751,929 Net to SS: $56,341,349 |
Business Overview
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