Casper warns investors that its business would be hurt if any of its 'thousands' of Instagram influencers turned against it

• Casper, the startup mattress retailer, has filed to go public on the New York Stock Exchange.
• The S-1 filing includes a customary list of "risk factors" that could affect the company's value, and one of Casper's disclosed risks is the network of social media influencers it uses to advertise.
• Casper warns that its reputation could take a hit if any of its influencers engage in behavior that "adversely" reflects on the company or fails to comply with the Federal Trade Commission's rules on influencers' ad disclosures.
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Online mattress seller Casper filed its paperwork Friday to become a public company, and it's warning potential investors that its value could be impacted by the network of influencers it partners with to advertise on social media.

As is customary for a S-1 filing, Casper disclosed a number of risk factors to potential investors that could cause the company's stock to decline. Two of these risk factors concern internet-bred influencers, who companies will often pay or provide free products to in exchange for advertisements and mentions on social platforms like Instagram, Twitter, and Snapchat.

Casper warned that missteps or a pattern of bad behavior by one of its "thousands" of social media influencers could damage the company's reputation and impact its IPO price. A bad review from an influencer could also hurt Casper, the company writes.

"Influencers with whom we maintain relationships could also engage in behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us," Casper said in its S-1 paperwork. "It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases."

As the influencer marketing space stays on track to reach $15 billion by 2022, brands engaging in influencer-fueled campaigns are increasingly held accountable for the behavior of the popular internet personalities they sponsor. In the face of majorly publicized scandals such as those involving PewDiePie or Logan Paul, YouTube and massive brands like Disney have reacted by distancing themselves from these creators and halting plans for partnership deals and ad campaigns.

Ad campaigns on social media have become so common that the federal government has gotten involved in its regulation. In November 2019, the Federal Trade Commission issued guidelines for how influencers should disclose sponsored and paid posts in order to maintain a sense of transparency and stay within the confines of the law.

These new FTC guidelines could also pose a potential problem for Casper, the company said in its S-1 filing. Casper is tasked with the "burden" of monitoring its influencers' posts to ensure they abide by federal guidelines. However, Casper admitted that it doesn't check or approve every post an influencer makes.

"While we ask influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influencers post," Casper wrote. "If we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations."

Since it launched in 2014, Casper has invested heavily in its online presence and relationship with influencers. The company sponsored a post on Instagram in 2015 from Kylie Jenner, who reportedly raked in around $400,000 per post in 2017. (That number has since spiked to over $1.2 million.)

Casper's influencer network is vast and far-ranging: Its ads have appeared in social media posts from famous pets, social media strategists, teen Nickelodeon stars, radio show hosts, and fitness gurus.

But Casper may be particularly cautious about influencers in its S-1 filing because it already knows what it's like for an influencer debacle have negative effects on the company's reputation. In 2016, Casper sued three popular mattress-review sites, claiming that they wrote reviews about Casper's competitors without disclosing they received the products for free as well as affiliate revenue for driving sales to these companies.

Casper alleged that the behavior had cost the mattress company "millions of dollars of lost sales," but all three sites settled with Casper in the end, Fast Company reported in 2017.