Figs' $1B Takeover Bid: A Lifeline or a Last Resort?

Figs, Inc. (FIGS), a direct-to-consumer healthcare apparel and lifestyle brand, has received a takeover offer from Story3 Capital Partners, valuing the company at over $1 billion, according to a Wall Street Journal report. The private equity firm offered $6 per share for all outstanding common shares it doesn't already own. This offer comes as Figs' shares jumped over 9% in premarket trading on Wednesday.

Figs, which went public in 2021 with an initial valuation of $4.57 billion, has faced challenges in maintaining its growth momentum as the COVID-19 pandemic has waned and demand for its products has returned to normal levels. The company's stock price has declined by over 20% this year, primarily due to increased operational costs and stagnant growth.

Story3's proposed takeover could provide Figs with the financial and strategic support needed to navigate a tough macroeconomic climate. As a private company, Figs would be empowered to accelerate its strategy, focus on innovation, and swiftly execute initiatives that build on its category leadership. Story3's experienced partners and long-term investment, along with debt financing from Fortress Investment Group, would enable Figs to overcome operational hurdles and achieve sustainable growth.



However, it's essential to consider whether Story3's proposed valuation aligns with Figs' long-term growth prospects. Figs' forward EPS is projected to be $0.08, resulting in a forward P/E ratio of 74.32. This suggests that the market expects Figs' earnings to grow in the coming years. Story3's proposed valuation of over $1 billion, or $6 per share, implies a market capitalization of approximately $1017 million. This valuation is slightly higher than Figs' current market capitalization of around $900 million, indicating that Story3 sees potential in the company's future growth prospects.



Nevertheless, Story3's proposed valuation is still lower than Figs' initial valuation of $4.57 billion when it went public in 2021. This discrepancy may reflect the challenges Figs has faced in maintaining its growth momentum as the COVID-19 pandemic has waned and demand for its products has returned to normal levels. Story3's offer suggests a confidence in Figs' long-term growth potential, despite recent earnings fluctuations.

In conclusion, Story3 Capital Partners' proposed takeover of Figs at $6 per share values the company at over $1 billion, a 12% premium to its current market capitalization. This offer aligns with Figs' projected earnings growth but remains lower than the company's initial valuation. While Story3 sees potential in Figs' future prospects, they are also aware of the challenges the company faces in a tough macroeconomic climate. As Figs considers this takeover offer, it must weigh the potential benefits of private ownership against the risks and uncertainties of remaining a public company.