So, that was intense.
Today’s Etsy IPO sent Wall Street into a two-hour apoplexy of trading that pushed the online flea market’s stock to more than double its original price and put the company’s valuation – for at least a few heady minutes – past $4 billion.
But the only things hotter than Etsy’s stock were the takes on what such an impressive debut “meant.”
Some were pithy...
Etsy’s offerings include a knit coffee warmer for $6.50 and a 1960 metal typewriter for $85. Etsy makes revenue by charging sellers listing fees and commissions. As a public company Etsy’s challenge will be to keep the artisans and craftmakers who sell their products on the site happy, as the it also seeks to build scale for investors.
Some were adorable...
And some kind of missed the point entirely...
In its IPO, the company offered 16.7 million shares to investors, and by pricing shares at $16 raised just under $287 million.Clearly, however, this price undersold investor demand by a bit, and had the company priced its IPO at $31 per share, it could raised $517 million. In other words, the company just missed out on an easy $230 million. But not really.
“But not really”… at all.
Despite all the fawning hullabaloo over Etsy’s “artisanal IPO” process - through which the company sought out like-minded, do-gooder investors that might have been otherwise boxed out of buying stock by evil corporations like Goldman Sachs – a whopping 85% of Etsy’s IPO was a structured like a straight-up Wall Street cash grab designed for them by…Goldman Sachs.
But here’s the thing, Goldman is not famed for leaving money on the table, and Etsy knows a thing or two about tables in its own right. The idea that Etsy and Goldman blew it by keeping the original offer price low is to misunderstand what just happened.
“It was very important for them to have this pop,” said Rapid Ratings CEO James Gellert. “This kind of huge surge allows them to cast a shadow that is longer than they are tall.”
Etsy is neither a hugely profitable business (it lost $15 million in 2014) nor does it possess a very long track record. What Etsy does have going for it are a Wall Street environment in love with tech startup narratives and its position as an asset class sub-category of one.
No one else does what Etsy is doing, at least not yet, and that “yet” scares the shit out of a lot of tech bubble-watchers.
For Etsy to really capture the day like it did, it seems like Goldman had to learn from its previous tech IPO pricing mistakes (ahem, Facebook) and build in some room for that all-important pop. More than a handful of tech analysts we’ve talked to see a future in which Etsy’s stock trades at around $25, a number that might have been a good target and put more money on the “table,” but then we wouldn’t have had the exciting morning we all got to share.
Regardless, kudos to Etsy for going full Jiffy and popping like crazy in the space provided.
And to be clear, the nonexistent popcorn in this analogy is completely organic, we're in the spirit.