Is the ELF Beauty IPO Changing the Face of the Industry?

By Chris Lange Updated Jan 13, 3:16AM EST · Published Sep 22, 11:15AM EDT

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Is the ELF Beauty IPO Changing the Face of the Industry? — © Thinkstock

ELF Beauty Inc. (NYSE: ELF) added to the list of powerhouse initial public offerings this week when it entered the market up well above its pricing, and it is currently trading over 50% from that level. Perhaps the Federal Reserve not raising rates Wednesday might have played into this overly positive sentiment. Regardless, does this reaction for the IPO mean that this cosmetic company can change the face of the industry?

The company originally priced its 8.33 million shares at $17 per share, with an overallotment option for an additional 1.25 million shares. However the stock actually entered the market at $24. At the $17 price, the entire offering was valued up to $162.9 million.

The underwriters for the offering are JPMorgan, Morgan Stanley, Piper Jaffray, Wells Fargo, William Blair, Cowen, BMO Capital Markets, Stifel and SunTrust Robinson Humphrey.

This is one of the fastest growing, most innovative cosmetics companies in the United States. ELF Beauty has challenged the traditional belief that quality cosmetics are only available at high prices in select channels. The company offers high-quality, prestige-inspired beauty products for eyes, lips and face at extraordinary value, with the majority of its items retailing for $6 or less.

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These price points encourage trial and experimentation, while the commitment to quality and a differentiated consumer engagement model engenders loyalty among a passionate and vocal group of consumers.

ELF Beauty believes its success is rooted in the innovation process and ability to build direct consumer relationships. Born as an e-commerce company over a decade ago, it has created a modern consumer engagement and responsive innovation model that keeps products on-trend and consumers engaged as brand ambassadors.

The consumers provide real-time feedback through reviews and social media, which enables ELF Beauty to refine and augment its product portfolio in response to their needs. The company leverages its fast-cycle product development and asset-light supply chain to launch high-quality products in as few as 20 weeks from concept, and 27 weeks on average.

The products are first launched on elfcosmetics.com, and distribution is generally only broadened to its retail customers after ELF Beauty receives strong consumer validation online. The company believes this has led to consistently strong retail sales per linear foot of shelf space. This is also one of the fastest growing cosmetics brands at Target, Walmart and CVS.

ELF Beauty intends to use the net proceeds from this offering to repay existing indebtedness, as well as for working capital and general corporate purposes.

Shares of ELF Beauty were trading up about 55% at $26.31, with a range of $23.73 to $26.58 on the day as of 11 a.m. Eastern.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.