IPO Update: Reborn Coffee (REBN) Aims For $6 Million IPO

A Quick Take On Reborn Coffee

Reborn Coffee, Inc. (REBN) has filed to boost $6 million in gross proceeds from the sale of its widespread stock in an IPO, based on an amended registration assertion.

The firm sells a spread of espresso and associated merchandise within the United States.

The IPO seems priced for perfection for this little firm producing excessive working losses.

I’m on Hold for REBN’s IPO because of extreme valuation and excessive enterprise transition dangers, though the low nominal value of IPO shares could entice day merchants searching for volatility.

Reborn Coffee Overview

Brea, California-based Reborn was based to supply and promote espresso merchandise by company owned places and franchisees.

Management is headed by Chief Executive Officer Jay Kim, who has been with the agency since inception in 2014 and was beforehand founding father of Wellspring Industry, an organization that created the Tutti Frutti yogurt retail idea.

The firm’s major choices embrace:

• Coffee beans

• Pour-over packs

• Cold brew espresso

Reborn has booked honest market worth funding of $9.7 million as of March 31, 2022.

Reborn – Customer Acquisition

The agency operates company owned retail places and kiosks and sells to shoppers in addition to by a B2B channel to company prospects.

Reborn has deliberate to start franchising its idea in California in 2022.

General & Administrative bills as a proportion of complete income have various as revenues have elevated, because the figures under point out:

Click to enlarge

(Source – SEC)

The General & Administrative effectivity fee, outlined as what number of {dollars} of extra new income are generated by every greenback of General & Administrative spend, rose to 1.6x in the latest reporting interval, as proven within the desk under:

Click to enlarge

(Source – SEC)

Reborn’s Market & Competition

According to a 2021 market research report by IBISWorld, the U.S. retail market for espresso could be an estimated $46.2 billion in 2021.

This represented a 2.6% 12 months over 12 months progress forecast.

Historically, the U.S. espresso market grew on common about 0.4% from 2016 to 2021.

Below is a chart displaying the historic market measurement trajectory since 2011:

Also, demand for pure espresso has softened as shopper tastes have shifted towards premium espresso and specialised blends and associated merchandise.

Major aggressive or different trade members embrace:

• Dunkin Donuts

• Starbucks (SBUX)

• Peet’s Coffee

• Independent espresso homes.

Reborn Coffee Financial Performance

The firm’s current monetary outcomes may be summarized as follows:

• Growing topline income

• Considerable working losses

• Higher money utilized in operations.

Below are related monetary outcomes derived from the agency’s registration assertion:

Click to enlarge

(Source – SEC)

As of March 31, 2022, Reborn had $183,191 in money and $4.0 million in complete liabilities.

Free money circulate throughout the twelve months ended March 31, 2022, was adverse ($2.5 million).

Reborn Coffee’s IPO Details

REBN intends to promote 1.2 million shares of widespread stock at a proposed midpoint value of $5.00 per share for gross proceeds of roughly $6.0 million, not together with the sale of customary underwriter choices.

No current or doubtlessly new shareholders have indicated an curiosity to buy shares on the IPO value.

As a part of the S-1 submitting, a variety of current particular person buyers have registered 1.8 million shares on the market.

Assuming a profitable IPO on the midpoint of the proposed value vary, the corporate’s enterprise worth at IPO (excluding underwriter choices) would approximate $59.1 million.

The float to excellent shares ratio (excluding underwriter choices) shall be roughly 9.3%. A determine underneath 10% is mostly thought of a ‘low float’ stock which may be topic to vital value volatility.

Per the agency’s most up-to-date regulatory submitting, it plans to make use of the online proceeds as follows:

…we at present intend to make use of the online proceeds we obtain from this providing for common company functions, together with working capital, working bills, and capital expenditures, opening new company-owned retail places, in addition to growing our franchise program. We estimate that the typical improvement value of a company-owned retailer location is $150,000, and subsequently we anticipate that we’ll use roughly $3,000,000 of the proceeds of this providing to open 20 new company-owned retail places. Even if we don’t consummate this providing, we intend to open 10 new company-owned retail places by the tip of the second quarter of 2023 by elevating the requisite funds (i.e., roughly $1,500,000) by personal or public choices, or a mix of each, though there is no such thing as a assure that it is going to be profitable in doing so.

(Source – SEC)

Management’s presentation of the corporate roadshow is just not out there.

Regarding excellent authorized proceedings, administration says the agency is just not topic to authorized proceedings that might have a fabric antagonistic impact on its monetary situation or operations.

The sole listed underwriter of the IPO is EF Hutton.

Valuation Metrics For Reborn Coffee

Below is a desk of the agency’s related capitalization and valuation metrics at IPO, excluding the results of underwriter choices:

Click to enlarge

(Source – SEC)

Commentary About Reborn Coffee

REBN goals to go public to fund its company growth and site progress plans.

The firm’s financials have generated growing topline income, substantial working losses and better money utilized in operations.

Free money circulate for the twelve months ended March 31, 2022, was adverse ($2.5 million).

General & Administrative bills as a proportion of complete income have various as income has elevated and its General & Administrative effectivity a number of was 1.6x in the latest reporting interval.

The agency at present plans to pay no dividends on its capital stock.

The market alternative for espresso and associated merchandise within the United States is giant however is rising at a low fee of progress.

EF Hutton is the only underwriter and IPOs led by the agency over the past 12-month interval have generated a median return of adverse (65.4%) since their IPO. This is a bottom-tier efficiency for all main underwriters throughout the interval.

The major dangers to the corporate’s outlook are its transition to a franchising mannequin and continued progress outdoors of its California state base because it seeks to develop its enterprise operations.

As for valuation, administration is asking IPO buyers to pay an Enterprise Value/Revenue a number of of twenty-two.3x, a particularly excessive a number of for a tiny firm producing little in the way in which of gross sales.

The IPO seems priced for perfection for this little firm producing excessive working losses.

I’m on Hold for REBN’s IPO because of extreme valuation and excessive enterprise transition dangers, though the low nominal value of IPO shares could entice day merchants searching for volatility.

Expected IPO Pricing Date: To be introduced