IPO

Fiverr’s IPO Bodes Well For (Some) Gig Economy Stocks

Initial Public Offering

Amid a slew of busted initial public offerings in the tech realm, with Uber and Lyft among them, and the specter of regulators looking into platform firms like Facebook and Google, a recent addition to the pantheon bears watching.

It’s no secret that the gig economy has grown by leaps and bounds. As many as a third of U.S. workers are involved, in some way, in project work. The economic potential is also considerable, as in 2018 it is estimated that gig workers earned $1.7 trillion.

The rising tide does not necessarily mean that all boats are lifted. Operating models are of course different across different verticals and platforms.

Case in point, of course, are Uber and Lyft, which are marked by red ink and stock prices that have broken below where they came out of the starting gate. As has been noted in this space, the two companies have divergent strategies to capitalize on their respective views of gig work. Lyft, of course, has set its sights on transportation. Uber has been spending time on branching out across wheels of several types, beyond cars and into bikes, for example. The company has also been leveraging local market power into ancillary services such as food delivery (a la Uber Eats).

There may be a bit of skepticism amid such buoyancy, at least for the Ubers and Lyfts. As Rohit Kulkarni, an MKM Partners analyst wrote, “Public markets haven’t (as yet) rolled out the red carpet for cash-burning gig economy start-ups, such as Upwork, Uber, and Lyft. We are believers in the long-term potential of these marketplaces, but risks such as unclear pathway to profitability and the debate around gig economy workers labeled as 1099-contractors would likely weigh on near-term post-IPO performance.”

And now comes Fiverr, the online platform focuses on freelance work. On Thursday (June 13), the company’s shares came public at $26, a far sight, 23.8 percent, to be specific, over the initial public offering — and by the end of the day the shares finished up by 90 percent, ending at $39.90.

The company also has a negative showing on its operating line. The latest quarter showed a net loss of $8.3 million, an improvement over the $16.3 million loss that had been seen a year ago.

Sales during that same quarterly year over year stretch were up 42 percent to $23.8 million.

Commentary from Fiverr CEO Micha Kaufman gives a bit of insight on how this platform seeks to be broad but also latch onto the tailwinds of a solid wave of demand, evidenced by the numbers above — and offering a matching service rather than deploying freelancers.  Separately, and in data as compiled by PYMNTS in its fourth quarter edition of the Gig Economy Index, 38.4 percent of non-seasonal gig workers sourced their gigs through digital marketplaces.

As quoted in WebProNews, the CEO said, “The way people usually find freelancers is they post on Facebook asking if someone knows a good graphics designer. What we’re doing is we’re making it a one-click experience. There’s no bidding, betting, negotiating. There’s browse, search, buy. It’s an Amazon experience to buy a digital service.”

The model has instead been likened to Amazon (and where in contrast to other firms Fiverr does not act as employer). Fiverr has pointed to content marketing, graphic design and advertising as key services. The CEO has said the volume of the categories served are worth $100 billion in the United States, and the take rate is 26 percent. (The ride-hailing firms have take rate percentages in the low 20s.)

The rising tide seen when firms go public does not necessarily mean that all boats are lifted along — but then again, riding the waves of a viable market may make for smooth sailing.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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