Etsy’s IPO Spike Valued Marketplace At $3.3B

Etsy has come a long way from its days in the Brooklyn apartment where the simple little website for craft-makers and hobbyists was born.

Now, as a marketplace that has about a million sellers and 20 million shoppers, Etsy is going public — a move that gave the company a massive boost yesterday (April 16) when the company opened its shares at $31. The stock was trading at over $35/share (115 percent jump) Thursday, and closed at $30/share — giving the company a value of close to $3.3 billion, CNN Money reported.

That $3.3 billion is far higher than Etsy’s initial IPO price at $16/share the evening before (April 15) when the online marketplace company raised $267 million. Thursday’s start for the company into the world of publicly traded companies seemed to provide Etsy the momentum needed for marketplace that hasn’t turned a profit yet. Etsy’s opening share price was a 94 percent increase from its initial IPO price so it’s off to the right start.

But the big discussions around Etsy — particularly among its merchant base — is if Etsy can grow its company while still maintaining the niche marketplace for homemade goods that attracted its core users. Since discussions of Esty going public surfaced, that conversation has been mixed into what Etsy’s future looks like.

Some might not be shocked to learn that Etsy hasn’t turned a profit yet either, as the company has cited its high development costs as the reason. But Etsy does have a knack for generating revenue — it brought in $200 million in 2014 by charging merchants to both list their goods and sell them.

Besides its traditional core business, Etsy also made moves to scale its marketplace beyond its ma’ and pa’ artists and crafters for merchandise; the company got into the wholesale purchase orders in 2014. This move was expected to bring in more inventory to drive up sales. That may be particularly attractive to shareholders once Etsy goes public. But it could also be the kiss of death to some of its smaller merchants who don’t want their once unique marketplace to become known as a massive wholesaler.

In terms of investments, Kathleen Smith — a principal at Renaissance Capital, which is a manager of IPO exchange-traded funds — told CNN Money that investors will have to review how Etsy can maintain its uniqueness, while still growing into a profitable company.

This means evaluating “the confidence that this company can scale without going to the dark side of full commercialism,” she said.

Profit, of course, for this now publicly traded company is key.

“Considering the company’s lack of profitability and capital structure inefficiency, Etsy has a long way to go before they’re a long-term sustainable business,” James Gellert, CEO of Rapid Ratings, told CNN.

Etsy lost $15.2 million in 2014, a bit of an uptick from the $796,000  it was down in 2013, but its total revenue climbed 56 percent to $195.6 million. The company will have to attract many new storefronts if it is pursuing profitability; the site’s average seller generated just $1,400 in revenue in 2014. Gross merchandise sales on Etsy climbed by 43 percent to $1.9 billion in 2014, but average buyers are still only spending about $100 – the plateau that figure has been at for three years.

Etsy’s CEO Chad Dickerson, however, said its IPO was an “important milestone,” for the company and said the company’s mission will still be to focus on its merchants — even as the company grows.

“We’ve come a long way since the beginning with a simple platform for artisans selling their neat products, first launched nearly 10 years ago,” he said in an interview with The New York Times. “Our mission to reimagine commerce is first and foremost about people, and we wouldn’t be here today without the dedication and passion of our community of more than 1 million sellers.”