Purple mattress goldilocks ad6/11/2023 ![]() They have a strike price of $11.50 and a duration of 5 years from the close of the transaction. We note that Purple also has warrants ( PRPLW) that trade freely. Of course, if it appears this trajectory is achievable, the share price should appreciate well in advance. At $1bn+ in sales, with a 15% EBITDA margin (the high-end of management's 3-5 year, medium-term margin outlook), we believe shares could triple based on a 9.4x EV/EBITDA multiple - the current blended multiple of Sleep Number ( SNBR) and Tempur Sealy ( TPX) - with the potential for a premium multiple given Purple's superior growth rate. We believe that Purple could achieve revenues in excess of $1bn by 2021 through ongoing growth in its core DTC (direct-to-consumer) channel, the addition of brick-and-mortar partners, product extensions in the sit and stand segments, and via international expansion. Some working capital adjustments and the repayment of $8mn on its Wells Fargo ( WFC) secured revolving loan facility should leave the company with over $35mn in cash on its balance sheet and an approximate neutral net debt position (We anticipate a new working capital line to be put in place at better terms). ![]() Notably, this has all been self-funded, until Friday, February 2 nd's business combination with Global Partner Acquisition Corp. At the midpoint of guidance, the company anticipates 121% growth in 2018, to $425mn, again almost 3x industry forecasts. It has gone from $5.8 million in sales in 2015, to $66.5mn in sales in 2016 (its first year selling mattresses), to an estimated $190-194mn in 2017, representing a 189% y/y growth rate in 2017, almost 3x that of the industry. We believe Purple ( NASDAQ: PRPL) has the potential to be one of the great growth stories of the next few years.
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