Oura is looking to raise as much as $3 billion in an IPO that would give it a valuation exceeding $16 billion.

      Oura is aiming for a September listing that could generate up to $3 billion and value the smart ring manufacturer at more than $16 billion, as reported by Bloomberg. This comes several months after the Finnish company filed quietly for a U.S. IPO.

      This valuation marks a significant increase from the $10.9 billion it held last September, in a sector that has been gaining ground from the Apple Watch for two years. A considerable portion of the offering is expected to be from existing shareholders rather than new investments. This aspect is important for interpreting the listing, as a large secondary offering suggests that the IPO serves as a liquidity opportunity for earlier investors rather than solely a fundraising effort.

      These early backers have seen substantial returns. Oura completed an $875 million Series E last September, with contributions from Fidelity, ICONIQ, Whale Rock, Atreides, and previous investors like Dexcom and Coatue.

      The company now employs over 900 individuals across its offices in San Francisco and Finland, having expanded from a niche initial audience. Initially, its customers were self-quantifying enthusiasts and biohacking executives, while its current focus is on sleep and recovery tracking for those seeking to understand their fatigue.

      The category has thrived due to a shift in measurement preferences. Metrics like sleep, recovery, and readiness fit well with passive continuous tracking, which is difficult to achieve with devices that are removed at night for charging.

      Oura's product proposition is that a ring is the wearable that people actually keep on. It lacks a screen for checking notifications, has no alerts to dismiss, and features a battery life measured in days instead of hours, which is a key reason it has captured market share from wrist devices.

      The latest offering, the Ring 5, launched at $399 as the smallest smart ring available, with its pricing and a subscription for data analysis forming the basis of the entire valuation.

      Recurring subscription revenue is what distinguishes a $16 billion valuation from one based on hardware sales, as ongoing income from software is valued differently than single sales of a titanium ring. Thus, the proportion of Oura’s revenue that is recurring is the most critical metric.

      Competition is emerging from various fronts. Samsung's Galaxy Ring has introduced a platform player, while Whoop, which offers a subscription-based screenless band, achieved a $10.1 billion valuation and has expressed IPO intentions.

      Oura is also defending its market position in court, having filed a lawsuit against rival Ultrahuman. Patent litigation serves as an indicator of how commoditized the hardware sector is becoming, and manufacturing rings is becoming less complex.

      Another factor to monitor in their filing is regulatory positioning. Oura has been cautious to position its offerings as wellness insights rather than medical diagnoses, making it crucial to determine how far it can advance towards clinical claims without facing regulations applicable to medical devices.

      The company has not publicly disclosed its revenue or membership figures, representing a significant gap in any analysis of a $16 billion valuation. This information will be revealed when the S-1 is released, which is a document worth anticipating.

      Manufacturing at scale for rings presents its own challenges, as the devices come in various sizes and cannot be modified post-purchase, turning fitting kits and returns into significant costs rather than mere footnotes. Investors will be interested in understanding how this issue evolves with increasing production volumes.

      The listing of a European hardware company in the U.S. at this scale is noteworthy. Oura is Finnish, with its manufacturing and research based there, while its target capital markets are not.

      The company has yet to confirm the listing, and Bloomberg's report details a plan rather than an official filing with specific terms. As September approaches, the public prospectus should clarify most outstanding questions soon.