Poshmark, the nine-year-old, Redwood City Ca.-based online marketplace for second-hand clothing, beauty, and home decor products, is set to start trading as a public company on the Nasdaq tomorrow after tonight pricing 6.6 million shares higher than originally planned, according to Bloomberg.
Per its report, the company, which earlier expected to sell shares at between $35 and $39 million, saw enough demand to rationalize a $42-per-share price — one that values the company at $3.5 billion on a fully diluted basis.
Given investors’ feverish embrace of all kinds of newly public consumer brands, including Airbnb, DoorDash and, to a more moderate degree, Wish (trading currently where it opened when it hit the market in mid-December), most industry observers anticipate smooth sailing for the company as it makes the move from private to publicly traded company.
Certainly, it has a few things going for it.
More than 70 million Poshmark users having sold more than 130 million items through the platform since its inception, according to the company. And its revenue is moving in the right direction. Poshmark makes money off commissions on peer-to-peer sales and on products that it sells sold via wholesale, and it turned profitable last year for the first time. According to its S-1, it produced net income of $21 million off revenue of $193 million during the nine months ended September 30, 2020, compared with a net loss of $34 million on revenue of $150 million during the same period in 2019.
Also, unlike many brick-and-mortar retail businesses that were hit especially hard by pandemic-related shutdowns — J. Crew, Neiman Marcus, and Brooks Brothers are just a few in a line of many to declare bankruptcy — Poshmark only facilitates transactions between buyers and sellers, so it doesn’t have the burden or expense of holding inventory.
Not last, resale platforms of all stripes have the wind at their back right now. Resale can be more affordable. It can be a means for sellers to make money. More, shoppers are more interested than ever in sustainability, and buying someone else’s never- or lightly-used items is more environmentally friendly than supporting, say, a fast fashion brand. (Forever 21, the fast-fashion mall staple, filed for bankruptcy in 2019.)
What Poshmark has to overcome includes improving the customer experience, if a variety of review sites is to be believed. The company routinely receives poor marks for its quality control and support service.
Poshmark, which has raised $153 million from its venture investors, is also challenged with making public market investors understand how it differs from already publicly traded rivals like eBay and The RealReal, which went public in 2019 and whose current market cap is roughly $2.3 billion, as well as other newer entrants. Indeed, one of its closest rivals, ThredUp, filed a confidential registration statement with the SEC for an IPO last fall around the same time that Poshmark did the same.