To be frank, I do not know how to value Honest Company

The Honest Company, a heavily venture-backed consumer goods company, announced an IPO price range this morning, telling investors that it expects to sell shares in its debut at $14 to $17 apiece. The former startup is selling 6,451,613 shares in its debut, while existing shareholders are letting 19,355,387 shares go.

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Honest’s IPO is not very large. The company’s own offered shares are worth $109.7 million at the top end of its range. Furthermore, because the company’s final private raise was worth $200 million back in 2018, it’s a comparatively modest sum.

Today, we’re digging into the Honest Company’s IPO pricing: We’ll calculate its IPO valuation range across a few different share counts, bring to bear its final private valuations and compare the entire dataset to its preliminary Q1 2021 numbers.

We care because IVP and Fidelity, Lightspeed and General Catalyst, ICONIQ and M13, Dragonner and others put capital into the Jessica Alba-founded company worth just over $500 million while private, according to Crunchbase. That’s an enormous bet.

Per its filings, Alba remains the company’s chief creative officer and chairs its board.

We owe it to our general understanding of the venture market to better understand what Honest is worth and why. Is this a company going public while markets are hot so it can try to limp across the finish line? Or is Honest something honestly more exciting? Let’s find out.

Honest Company’s IPO worth

Using a simple share count of 90,518,137 outstanding after its IPO, Honest is worth $1.27 billion to $1.54 billion at $14 to $17 per share. On a fully diluted basis, Renaissance Capital calculates that the former startup is worth $1.6 billion at its midpoint value, a figure that we estimate rises to around $1.75 billion at the top end of its anticipated price range.

Are those strong numbers? There are two ways to measure: against the company’s final private price, or we can use its recent financial performance as a yardstick.