Oura has suspended its plans to go public, citing "uncertainty" in the market that it believes will impact its initial public offering.
The health technology company that makes the Oura smart ring said that, despite strong demand, it would postpone its IPO on the Nasdaq exchange "due to uncertainty in the IPO market."
"Our mission is to empower people to live healthier, longer, and an IPO is just one step in our journey," Tom Hale, Oura's CEO, said in a statement. "We aim to deliver an extraordinary IPO for our employees and investors and we have the luxury of choosing our moment. In the meantime, we will execute against the opportunities ahead."
Many factors can impact market sentiment for an IPO-including bond yields. When yields are higher, equity valuations can become compressed, dampening sentiment for red-hot companies going public.
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Oura, the smart ring seen on so many index fingers, is about to go public.
The San Francisco company's roadshow is expected to culminate after Tuesday's close, in a $2 billion initial public offering. If its IPO is successful, it could be followed by public offerings for other health wearables, the likeliest being the Boston-based vendor of fitness armbands, Whoop.
Oura is attractive to investors because it both makes money selling its rings and then picks up continuing subscription revenue from buyers who want comprehensive health data and analytics.
"The subscription is the business model," Oura CEO Tom Hale told Robinhood Markets CEO Vlad Tenev, in a roadshow interview last week. While ring sales have roughly doubled in each of the last several years, so has Oura's paid subscribers, who now total five million.
Oura is effectively a tiny computer that is always on you-tracking sleep, heart rate, ovulation, and other life qualities. As doctors use artificial intelligence to monitor people with these remote health sensors, Oura, Apple, Alphabet's Google, Garmin, Whoop, and other device firms may become healthcare gatekeepers, with their apps steering patients to specialists, hospitals and laboratories.
And applications beyond health may become part of Oura's ring. "Could you imagine this as your wallet and your keys?" Hale told the Robinhood audience. "It's just with you all the time, you use it to pay, you use it to start your computer."
From its launch in Finland in 2013, Oura has stayed ahead of other smart ring makers. Its latest ring, introduced in June, retails from $400 to $500 and is the smallest around.
Oura's smartphone app gives limited free feedback on sleep and activity. But for $70 a year, subscribers can track their sleep, temperature, oxygen levels, blood pressure and other health measures, then get guidance from an Oura Advisor AI. Over 70% of subscribers are women. The company says daily usage is high, and subscription renewals average 85%.
For now, Oura clearly dominates the smart ring niche. As a market that is sized at a couple of billion dollars annually, it has been too small to attract giants like Apple, which brings in more than $30 billion a year from sales of wearables like the Apple Watch and iPod earbuds.
Investors who followed the rise and falls of the GoPro action camera and the Fitbit armband may wonder if smart $400 rings are a fad and recession-proof. But over the seven quarters shown in Oura's prospectus, sales momentum has built.
Revenue in the nine months ended June was $1.2 billion, most from the U.S., and it rose about 75% over the prior year. Pretax earnings, minus noncash charges, were $107 million in the latest nine months.
At the $42 midpoint of the potential pricing, Oura's IPO would value the business at $13.5 billion. That's not cheap, at over eight times annualized sales and 30 times cash flow. The sales multiple is comparable to GoPro's at the last decade's peak valuation, while less than Apple's today.
It isn't comforting that three-quarters of the offering will be shares sold by venture investors (if bankers exercise their overallotment option). That means most of the money raised in the IPO won't go to fund Oura's growth. The half billion dollars that Oura will net in the offering will go almost entirely to cover withholding taxes on employee stock options.
Yet despite those cautions, Oura is an appealing bet on the marriage of consumer wellness and digitized healthcare. It has a strong consumer following and its valuation won't be much higher than the $10 billion that Danaher paid to acquire the finger oximetry company Masimo in February. In January, the Food and Drug Administration issued guidance that encouraged "wellness" vendors like Oura to provide health data, as long as they don't claim to diagnose their users.
As the medical technology consultant Blythe Karow points out, wearable platforms like Oura, Whoop and Apple may become the first conversations that people have on many health issues. Oura and Whoop already refer their subscribers to medical labs for blood tests.
"On the ring side, Oura owns it," says Karow.
The federal Centers for Medicare and Medicaid Services just began pilot programs that pay for remote patient monitoring of chronic diseases. Oura and Whoop are partnering with healthcare service firms on those programs.
Whoop has followed close behind Oura in private capital funding rounds, so many in medical technology predict that the Boston armband and wearables firm will soon follow Oura into the public markets.
Oura isn't a cheap IPO, but it is a good entree into the growing overlap of personal fitness and 24-by-7 healthcare.
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