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Is Etsy's IPO a Faustian Wall Street Bargain?

The God of Finance has no patience for Etsy's Brooklyn Hipster do-goodnicks.

It's time to get worried about Etsy, you guys.

Brooklyn's super-powered digital flea market is in the midst of an IPO roadshow that is designed to help it enter publicly-traded life as a $2 billion company. But some are concerned that in doing so, the chaste corporate flower that is Etsy will have to sacrifice its decency and innocence. On Wall Street, where everyone knows there is no God but money, Etsy’s charming corporate ethos – one that gives employees 40 paid hours a year to volunteer in their communities – is veritably unheard of, and that concerns people who care.

 In Etsy’s pursuit of investors—and a $1.8 billion valuation— the company's values are central to the pitch. It is asking future stockholders to be OK with a management team that refuses to squeeze every penny of profit out of its 1.4 million active sellers or sacrifices community benefits to slash costs.

Wall Street isn’t used to that, and as of now, the law has been on the side of investors. When Etsy goes public, it will add to its list of legal responsibilities the promise of “maximizing shareholder value.” And that's where the tension comes in.

Tension indeed. Etsy is making its crunchy beliefs part of any deal, but can that work?

"It’s like a beautiful test in a way to see if it's possible to have a mission beyond money," said Rett Wallace, chief executive officer of Triton Research. "You see these situations all the time where even when management is doing their best to take every penny off the table—regardless of what it does to the widows and orphans—you often see fund managers saying, 'You're not doing enough to make money.'"

Yeah, there are widows and orphans involved in this hypothetical tug of war between Etsy and The Street, apparently. But those poor souls can rest easy for a while because Etsy is a B-Corporation, which means that it has signed papers promising to do good whilst making a profit.

But there might be a problem with the second half of that equation.

Chief Executive Officer Chad Dickerson is still going to have to justify Etsy's money-making prospects. Sales last year surged 56 percent, to $195.6 million, but losses widened to $15.2 million. Meanwhile, some investors are sure to be asking about another number: If $1.93 billion exchanged hands between buyers and sellers on the site, why aren't profits higher?

Still though, pray for Etsy’s virginal, if not-yet-quite-profitable, soul. And hey, at least Goldman is involved, so the widows and orphans should be a-okay.

Etsy's IPO Is a Direct Challenge to Wall Street's Beliefs [Bloomberg]


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