Note: This article contains incorrect information. Please read this correction piece instead. First Stage Investor sincerely apologizes for this mistake.
DBG (Digital Brands Group) holds a unique distinction in the First Stage Investor portfolio. It’s the only company we’ve recommended three times. And now it’s adding an even greater distinction. It’s going public. It’s the first startup in the First Stage Investor portfolio to do so.
DBG didn’t always go by that name. When we first recommended it in 2016, it went by the name of DSTLD. Back then, it was a DTC company selling “slow fashion” jeans for half or less than what you’d pay at a store. The company has come a long way since then.
It has adopted a growth-through-acquisition strategy where it buys lifestyle clothing brands and tailors them for strong DTC sales. Since 2016, it’s expanded into multiple product lines (on-the-go women’s wear, men’s suits, luggage, T-shirts, pocket books, etc) and channels (in-person showrooms and stores). As it acquires more brands, its product lines will be expanding even further.
DBG has filed an S-1 with the SEC to join the Nasdaq Capital Market (Nasdaq CM). Before it was renamed in 2005, the NasdaqCM was known as the Nasdaq SmallCap Market, reflecting its role of primarily listing small cap companies. It’s mainly meant for companies that need to raise capital.
That makes sense. Given DBG’s acquisition-based growth strategy, it will likely need to raise again to fund its future acquisitions.
DBG’s forthcoming IPO will be raising $10 million at a pre-money valuation of $50 million. Adding the $10 million to the $50 million valuation means the company will be sporting a post-money valuation of $60 million.
So, how did First Stage Investor members make out?
We first recommended this dynamic growth company in 2016 at a $22 million pre-money valuation. When we recommended it again a year later, DBG’s pre-money valuation had increased to $30 million with shares priced at $0.50 each. In 2018, we did it a third time. DBG’s shares had increased to $0.53 each and the valuation to $35 million.
In terms of valuation, DBG has gone from $22 million in its first crowdfunding round to $50 million for the forthcoming IPO valuation. Valuation has more than doubled. That’s pretty good. But it’s not really the metric you should be focusing on. The share price you bought and the share price you can sell at — which is the IPO share price — is what you should really be looking at.
Depending on when you invested (based on our recommendations), your share price was around $0.50 — give or take a few pennies. The IPO share price is $5.00. The math couldn’t be easier. You’ve made 10X on your investment. So, if you bought $1,000 worth of shares in DBG during one of its three earlier rounds, they will be worth around $10,000 based on the company’s IPO price.
DBG investors should be getting more information from SeedInvest once the IPO goes live. SeedInvest will explain how your private shares will be converted to public shares. So keep an eye on your inbox for emails from them.
But I can share some details from DBG’s S-1 filing with you right now. With every common stock purchase, DBG will offer “an accompanying warrant” to purchase one share of common stock at an exercise price of $5.50 per share. Each warrant will be exercisable upon issuance and will expire five years from issuance. Common stock will trade under the symbol of DBGI. Warrants will trade under the symbol of DBGIW.
I believe that DBG’s growth through acquisition strategy is as compelling as ever. DBG targets three groups of companies that all offer nice upside and would be receptive to buyout offers…
- Strong legacy brands that have been mismanaged.
- Strong brands that do not have capital to grow.
- And wholesale brands that are struggling to transition to e-commerce.
There will be no lack of companies to choose from within those three buckets. So, congratulations to all of you who had the foresight to invest in DBG’s early raises. You made a great decision… and a highly profitable one. I’ll keep you informed as more information becomes available.