MorningWord 1/31/17: Freak-Out In the Sheets

by Dan January 31, 2017 8:35 am • FREE ACCESS

Shares of the mattress maker Tempur Sealy (TPX) were down 28% yesterday, making a new 52 week low. That also marked a 45% decline from its 52 week highs made in August 2016 after the company announced the termination of contracts with its largest retailer in the U.S. Mattress Firm after failing to meet requests for greater ‘economic concessions”.  The chart of TPX over the last year has more gaps than the Piccadilly Circus Tube line:

TPX 1yr chart from Bloomberg
TPX 1yr chart from Bloomberg

I have not idea the reasons why TPX’s largest North American retailer would risk losing one of its largest suppliers, playing a game of chicken, on both sides. But I can only tell you my mattress buying experience two weeks ago did not include TPX or Mattress Firm, but from NY based venture backed company Casper. Ordering a mattress online was as easy as ordering food from Seamless or Caviar, was delivered in less than 2 hours and has a 30 day money back guarantee.I will probably never step foot in a mattress store again.  In a little more than two years, Casper has gained more than $100 million in sales, going after a global market that had $25 billion in sales in 2015, and there is little wonder why the company has been able to raise $70 million, valuing it at over $550 million.

I suspect Casper will never get to IPO as it will get bought by a consumer products company that would like to apply its model to other similar sort of products, the way Dollar Shave Club was acquired by Unilever for $1 billion last summer.

For those of you who have been doing this long enough to remember trading,, and post ipo in the run up to the dotcom implosion in 2000, sadly you are probably not gonna get a shot to trade the fastest growing, disruptive companies of this cycle as M&A will be too attractive to those being disrupted. But the be aware of the companies that are already public like TPX, and being disrupted.