She came up with the idea for The Honest Company because she wanted to solve a certain problem. It was 2008, she was pregnant, and it seemed harder than it should have been to find natural baby products that were also affordable. That anger turned into a business, and it grew into a public company worth more than a billion dollars. In between, there was a story about ambition, timing the market, and how harsh Wall Street can be when the growth story stops making sense.
In May 2021, The Honest Company went public on the Nasdaq at $16 a share. The stock went up 44 percent on its first day of trading, which is the kind of start that makes news and gets co-founders photographed on trading floors. After less than a week, the price of the shares had dropped below the IPO price again. The company said the stock was worth no more than $7. It’s impossible not to notice how cruel that timeline is.
It was the IPO that showed how little the company had grown over the past few years. In 2020, the company made about $300 million in sales, which was a 28% increase from the previous year. However, that was only a little more than what the company had made five years before. At the same time, the S&P 500 doubled during that time. Others in the same field, like Estée Lauder, saw their stock prices go up by almost 250 percent. Once thought of as a high-growth unicorn, The Honest Company had been doing nothing while everyone else swam ahead.
In 2015, the company was at its peak. It was too focused on consumer goods to be a tech darling, but it was also too much like a startup to compete like a traditional packaged goods company. At a valuation of $1.7 billion, it raised $100 million that year, which seemed like a lot of money. Six years later, the IPO price fell in the same range. People who put money in early did well. People who bought at the 2015 high were hoping for a miracle exit.
Alba had about a 6 percent stake in the company at the time of the offering. She stood to make around $100 million from the IPO, which is a lot of money but not nearly as much as Forbes thought she was worth in 2016, when her stake was said to be closer to 20 percent. Over years of funding rounds and reorganization, that dilution tells its own quiet story about how the cap table changes when growth doesn’t happen as planned.
The business did put in the work, which is good. Since 2017, Honest has changed the formulas of about 90% of its products, cut staff, stopped lines that weren’t selling well, and lessened its reliance on direct-to-consumer sales, which looks great in pitch decks but costs a lot of money in real life. The gross margins got better. In 2020, losses dropped from $31 million in 2019 to $14.5 million. There are a lot of big things here. But the business had never made money, and that was a big problem for it when it went public.
Being a public company and running an eco-brand is a very hard thing to do. Values-first positioning is what brings in early customers, but it doesn’t always lead to the kind of consistent quarterly performance that keeps institutional investors waiting. A cheaper competitor is always ready to drop the “clean” label and offer a better deal. A bigger company with better distribution is always out there. It’s also always there, pushing you to grow faster than your mission lets you.
It’s still not clear if The Honest Company found a long-term solution or just stayed stable long enough to sound the alarm. It is clear, though, that good intentions and real consumer demand are not enough on their own. For Honest, the answers have rarely been as clean as the products it sells when Wall Street asks tougher questions.
