{ "docId": "019dd923-622c-750b-8b99-4b92274d3e76", "docSlug": "0a0319cd79cc", "documentTitle": "FIGS, Inc. (FIGS)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2022-09-07 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 6, "pageCount": 113, "prevPage": 5, "nextPage": 7, "slideType": "executive_summary", "function": "summarize", "density": "overcrowded", "nDataPoints": 8, "notes": "The slide uses a 'villain critique' approach by attacking the integrity of the founder's narrative.", "elementsJson": [ "headline_text", "paragraph", "bullet_list" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-4b92274d3e76/6", "deckHref": "/decks/019dd923-622c-750b-8b99-4b92274d3e76", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-4b92274d3e76.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-4b92274d3e76#slide-6", "components": [ { "bbox": null, "kind": "callout", "text": "Given FIGS carefully crafted corporate image, we believe this level of exaggeration can materially harm FIGS’ brand.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-e6ec-7186-b7de-126478ed3609", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.32, "w": 0.9, "x": 0.05, "y": 0.63 }, "kind": "list", "text": "Based on our review of legal, corporate, and other public documents, we provide evidence that indicates Hasson largely lived in California (and perhaps New York) for much of her time before starting FIGS, meaning she spent substantially less than seven years in Italy, if she ever lived there at all.\nHasson’s biography does not disclose that she declared personal bankruptcy in 2009, and as part of a related lawsuit, Hasson was accused of making false statements. As disclosed in her testimony, both of the handbag companies she formed were failures and worthless. In fact, she admitted that the company that bore her name, Hasson International, never even got off the ground because she “was never able to put any energy into the project”.\nMoreover, subsequent disclosures from Hasson, such as University of Wisconsin alumni profile released in 2011 around the time of her fateful lunch with a nurse friend that launched the idea for FIGS, makes no mention of Italy, handbags, or successful exits that soon became FIGS corporate lore.\nWe find that other elements of the FIGS origin story are plagued by small inconsistencies, which in our opinion calls into question the broader origin story.\nGiven FIGS carefully crafted corporate image, we believe this level of exaggeration can materially harm FIGS’ brand.", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "33cc008b-a848-4d25-830d-6ebe6a1744f0", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "downside risk: 45%-60%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd952-e6ec-7186-b7de-18932ae9b7d5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.9, "x": 0.05, "y": 0.55 }, "kind": "paragraph", "text": "One of the central tenets of the FIGS origin story and brand image is that co-founder (now Executive Chair) Heather Hasson is a successful serial entrepreneur who brought to FIGS a seven-year history of running a successful handbag company in Italy. However, our research finds serious holes in that story.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "35f541cb-2ca8-4dbd-88c1-7fea193e71b8", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.35, "w": 0.9, "x": 0.05, "y": 0.18 }, "kind": "paragraph", "text": "FIGS, Inc. (NYSE: FIGS or “the Company”) is class of 2021 IPO and retailer of healthcare apparel (i.e. “scrubs”) to medical professionals. Founded in 2013 by Heather Hasson and Trina Spear, FIGS has grown revenue rapidly, from $18 million in 2017 to $419 million in 2021. FIGS management is fond of saying that it branded an unbranded industry, de-commoditized a commoditized product, and were first to introduce a direct-to-consumer model for scrubs. With media savvy and an early brand recognition, we believe FIGS was a COVID-19 beneficiary that will fail to sustain momentum due to demand normalization and increasing competition. After a detailed forensic review of FIGS management, its business, and financial reporting, we see a markedly different side to the FIGS “Awesome Humans” story. We believe FIGS co-founders are prone to exaggerating their professional work history and key business and financial metrics. For example, we find evidence to suggest that historical revenue figures were inflated by 82%, gross margins by 2,040 basis points, and its Total Addressable Market (TAM) potential by 135%. Although FIGS initially altered the scrubs landscape, we believe it has virtually no sustainable competitive advantage and see multiple signs, including ballooning inventory and a change in its “Forward-looking statements” disclaimer, that its optimistic future goals will sorely disappoint. The history of retail stocks shows that revenue growth slowdowns are a harbinger for multiple compression, and given FIGS industry premium multiple of nearly 4.0x 2022E revenues, we see room for up to 45% – 60% downside risk ($4.40 - $6.05) per share.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "57548b16-4a2f-4a8f-8583-cee7b9f19216", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "was never able to put any energy into the project — Heather Hasson (admitted in testimony regarding Hasson International).", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-e6ec-7186-b7de-17e620be6ef9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.31, "y": 0.03 }, "kind": "title", "text": "Strong Sell Opinion on FIGS With 45%-60% Downside Risk", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bec1e705-b0c6-4e9b-89d8-e7d95ffdace4", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "antagonist-introduction", "slug": null, "matchId": "b7dc8945-4422-4f3c-ba86-5c7c36707fc3", "evidence": "The slide explicitly targets the co-founder's credibility to undermine the company's brand narrative.", "confidence": 0.9 } ], "arcBeats": [ { "to": 20, "from": 6, "beatId": "86f72659-c9b2-4b6d-8778-16516b4f763e", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "Detailed critique of FIGS' business practices and financials", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }