Liquid Death Hires Goldman Sachs, Aiming for 2024 IPO

The first half of 2023 has been a sour one for the IPO market, continuing the freeze that came over the market in 2022 after an ebullient 2021. But investment bankers see some signs of life for a bigger opening next year, especially as investor demand grows for newly listed companies, like Cava, a fast-casual chain that went public last month, and Oddity, a direct-to-consumer beauty brand that plans to list publicly this month.

It helps that the stock market has rallied—the S&P 500 is up 17% so far this year. And a government report today showed inflation had been further reined in, a sign that interest rates shouldn’t continue to rise indefinitely.

Tech IPOs later this year are likely to include SoftBank-owned chip designer Arm, grocery delivery firm Instacart and marketing tech startup Klaviyo, although the timing for some of them could slip into next year. Each of those companies has already hired bankers and filed their IPO documents with the Securities and Exchange Commission.

If it goes forward, Liquid Death’s listing would represent a test for VCs’ on-and-off interest in startups that compete in more traditional sectors rather than internet or software. Bankers and analysts are likely to compare Liquid Death to fast-growing energy drink brands like Celsius Holdings and Monster.

Mike Cessario, a former creative director who worked on campaigns for Netflix shows, started Liquid Death in 2019. The firm’s success is a feat of branding; it doesn’t promise higher quality or better-tasting water. Instead, it has tried to appeal to young consumers with tongue-in-cheek branding taglines like “murder your thirst” and stunt advertising efforts like a partnership with Blink 182 drummer Travis Barker to sell an enema kit.

“Like every truly large valuable brand, it is all marketing and brand because the reason people choose things 98% of the time is not rational. It’s emotional,” Cessario told the Washington Post last month.

Liquid Death, based in Los Angeles, has raised $200 million in venture capital, most recently at a $700 million valuation last year, according to PitchBook. Its main backer is Science, a Santa Monica-based firm.

Peter Pham, co-founder of Science and a board member at Liquid Death, wrote last year that the beverage company’s revenue nearly tripled between 2021 and 2022, from $45 million to $130 million. He wrote the company was on pace to double those sales this year.

Public markets investors have rewarded some fast-growing beverage firms this year. Celsius Holdings, which makes low-calorie energy drinks and went public in 2019, has seen its stock price rise about 50% in 2023. That firm also isn’t profitable. Its valuation is about 10 times next year’s expected sales. Celsius’ appeal to investors implies Liquid Death could see its valuation rise if it were to go public today.

Still, Liquid Death’s lack of profits could potentially drag on its stock price, not to mention its focus on a largely commoditized beverage category: water. The company doesn’t expect to be profitable until 2024, Forbes reported. Liquid Death’s gross profits—which don’t include operating expenses like most employee costs—were only about 12% of revenue, far lower than other beverage companies, according to that report. The recently moved its water sourcing to the U.S. to reduce costs. Liquid Death has also started selling iced tea.