Olaplex IPO: OLPX offered at $17-$19 per share later this week - Investopedia

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Olaplex Holdings Inc. is a scientifically driven beauty company primarily focused on manufacturing luxury haircare products for the professional haircare industry. The company's portfolio includes products for both professional and home use, including shampoos and conditioners, and bond multipliers. The company has 100 patents. Its products are based on scientifically supported designs aimed at treating damaged hair.

Olaplex recently filed for an initial public offering (IPO) for shares of common stock held by its two institutional shareholders. The company submitted an S-1 registration form to the Securities and Exchange Commission (SEC) on Aug. 27, 2021. It has since submitted two amendments to the original S-1, the latest of which was submitted on Sept. 28, 2021. Although an exact date for the IPO was not disclosed in the original S-1 or in either of the amendments, it is expected to take place this week. The shares will be listed on the Nasdaq Global Select Market tier of the broader Nasdaq Stock Market under the ticker symbol "OLPX".

A total of 67.0 million shares of Olaplex's common stock is expected to be sold in the offering. The sellers of the stock are the company's two institutional shareholders, which are Advent International Corp. and Mousse Partners Ltd. However, if the IPO's underwriters sell more than 67.0 million shares, they have the option to purchase an additional 10.05 million shares. This option is often referred to as a "greenshoe option". The opening price of the shares is expected to fall somewhere within the range of $17.00-$19.00 per share, which could fetch Olaplex a valuation as high as $12.3 billion. All of the shares are being sold by existing stockholders and the company will not receive any of the proceeds of the sale.

Following the completion of the IPO, investment funds affiliated with private equity firm Advent International, which acquired Olaplex in January 2020, would beneficially own approximately 79.6% of the combined voting power of Olaplex's common stock. Or Advent would own 78.2% of the combined voting power if the underwriters exercise the greenshoe option to purchase the additional 10.05 million shares. This will make Olaplex a "controlled company", which will be exempt from certain corporate governance requirements, such as the requirement to have an independent board of directors or independent compensation committee.

Key Takeaways

• Olaplex is a luxury haircare company specializing in the provision of professional haircare products.
• Olaplex will go public under the ticker "OLPX" later this week at an estimated price range of $17.00-$19.00.
• The company's two institutional shareholders are selling a combined 67.0 million shares. The underwriters of the IPO have an option to purchase an additional 10.05 million shares in the case that the number of shares sold exceeds 67.0 million.
• Olaplex is targeting a valuation of $12.3 billion in the IPO, up from $1.5 billion reported earlier this year.
• 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 was founded by the company's former Chief Executive Officer (CEO) Dean Christal. Christal's mother worked as a licensed hairdresser and operated a home-based salon, and his father owned 26 beauty distribution stores, providing the son with a deep understanding of the haircare business. Christal went on to launch Olaplex in 2014, beginning with a line of just three products sold exclusively to haircare professionals. The company's bond multiplying technology was a novel innovation in the industry, enabling hairdressers to repair damaged hair and improve haircare services offered to their clientele.

Since the initial launch, Olaplex has further developed its product line, now offering a suite of 11 different haircare products through professional, specialty retail, and direct-to-consumer (DTC) channels. The company's focus is offering science-based products that address the treatment, maintenance, and protection of hair. Its product portfolio, supported by scores of patents, creates barriers to entry for competitors in the haircare business and related industries.

Olaplex is currently led by President, CEO, and Director JuE Wong. Wong, who has extensive experience in the beauty and consumer industries, was named CEO in January 2020. She has expertise managing fast-growing businesses. Tiffany Walden is chief operating officer (COO), chief legal officer, secretary, and director, and Eric Tiziani is the chief financial officer (CFO).

Olaplex Financials

Olaplex provided recent financial results in its second amendment to its S-1 registration form. For the quarter ended June 30, 2021, the company's net income rose nearly twenty-five times to $49.4 million compared to the same period a year ago. Net sales increased 175.3% year over year (YOY) to $152.1 million. For all of 2020, net income sank 35.5% despite revenue growth of 90.4%. Large interest expenses hurt Olaplex's earnings.

The company's operations and financial results were also affected by the COVID-19 pandemic. The outbreak of the coronavirus in early 2020 disrupted Olaplex's retail stores, hair salons, manufacturing, and distribution. Many salons were required to close or operate at reduced capacity, which triggered a shift in demand from the company's professional sales channel to its specialty retail and DTC channels. Olaplex said it has not experienced a decline in demand from DTC channels even as restrictions have eased and salons have begun returning to more normal capacity.

Olaplex's total book value, the difference between its assets and liabilities, as of June 30, 2021, was $627.4 million. Total cash and cash equivalents on the company's balance sheet at the end of the period were $76.4 million, which is up nearly seven times compared to the end of 2020.

Olaplex Key Financials
	Q2 FY 2021	Q2 FY 2020
Net Sales ($M)	152.1	55.3
Net Income ($M)	49.4	2.0

^{Source: Olaplex S-1 (Amendement No. 2)}

How Much is Olaplex Worth?

In June 2021, Bloomberg reported that Advent was exploring options to sell Olaplex and was targeting a valuation of at least $1.5 billion. Advent finalized its ownership of Olaplex in early 2020, but the financial details of that transaction were not disclosed. Advent owns 89.3% of Olaplex's outstanding shares. The other institutional shareholder, private equity firm Mousse Partners, owns 6.8%.

In the coming IPO, Advent is currently targeting a valuation of $12.3 billion, which is dramatically higher than the valuation given to Olaplex only a few months ago. That higher valuation is based on the proposed maximum opening share price of $19.00 disclosed in the second amendment to Olaplex's S-1 filing and the approximately 648.1 million total number of shares that will be outstanding following the IPO. Advent is offering 62.5 million shares for sale in the IPO and Mousse Partners is offering 4.5 million for a total of 67.0 million shares.

Olaplex Key Competitors

The size of the global haircare market is expected to grow from an estimated $92.5 billion in 2020 to $105.1 billion in 2025. Olaplex faces a number of big rivals including France-based L'Oreal S.A. (OR.PA), U.K.-based Unilever PLC (ULVR), Germany-based Henkel AG & Co. KGaA (HEN3), and Japan-based Kao Corp. (KAO). Olaplex also competes with smaller, independent brands and some of the company's competitors have ownership interests in retailers that are its customers.

The Bottom Line

Luxury haircare company Olaplex submitted its IPO registration form in late August. A total of 67.0 million shares are being offered for sale, plus an additional 10.05 million shares if the underwriters' greenshoe option is exercised. The shares will be listed on the Nasdaq under the ticker "OLPX" at an expected opening price between $17.00-$19.00. The IPO is expected to take place this week.

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