Casper has highlighted the growing power of social-media influencers to make or break brands, naming its own online advocates as one of the risk factors facing its initial public offering.
The US mattress-in-a-box company launched in 2014, and emerged as an internet sensation when Kylie Jenner, who has more than 150m followers on Instagram, showed off pictures of its wares.
Filing for an IPO on Friday, Casper warned investors that its inability to control future messaging by such influencers could put their money at risk.
“Use of social media and influencers may materially and adversely affect our reputation,” the company wrote in its offering documents.
“Influencers with whom we maintain relationships could also engage in behaviour or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us.”
Influencer marketing has expanded into an $8bn business as celebrities, experts and other people with large followings on social media platforms charge thousands of dollars to promote products.
For start-ups such as Casper, influencers offer an opportunity to reach customers directly — and at a relatively low cost. The danger is that influencers associated with a brand lose their enthusiasm for a product — or their sway over the public.
Social media influencers are also becoming a legal risk for companies as US and UK regulators issue guidelines that call on influencers to more conspicuously disclose their relationships with brands.
Casper said its influencers could “subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties” that may undermine its financial health.
Online fashion brand Revolve, which last year raised $212m in an IPO giving it a $1.3bn valuation, also listed its influencer marketing strategy as a risk in its offering documents.
“If we are not able to develop and maintain positive relationships with our network of over 3,500 influencers, our ability to promote and maintain awareness of our sites and brands and leverage social media platforms to drive visits to our sites may be adversely affected,” the company wrote.
Casper’s IPO will be closely watched on Wall Street because it is one of the first tests this year of the investor appetite for unprofitable consumer businesses backed by venture capital, following stumbles by groups such as Peloton, SmileDirectClub and WeWork last year.