Etsy stock nearly doubles, company valued at more than US$3.5bn

17 Apr 2015

It turns out arts and crafts is a subject we all should have paid more attention to in school, with Etsy, the online marketplace for buying and selling crafty items, absolutely booming.

Floating on the stock exchange yesterday, the company’s shares rocketed up from their original set price of US$16, peaking at US$35, before settling on US$30 – this values the company at more than US$3.5bn.

Etsy raised a good chunk of cash before fully floating, raising US$287 from more than 16m shares, to value the company at US$1.8bn, half of its subsequent closing value.

Etsy’s growth has been phenomenal; it was originally set up as a way for founder Rob Kalin to sell his handmade, wooden computers back in 2005.

However, the company doesn’t make a profit – its losses grew from US$796,000 in 2013 to more than US$15m last year, despite revenues climbing by more than half.

Wrong starting price

Whenever a company’s share price shifts as dramatically as 86pc on opening day, it’s usually fair to say it was priced incorrectly. But then again, who would have predicted a US$3.5bn+ valuation for a loss-making online arts and crafts marketplace?

What’s interesting is ABCNews suggesting Etsy is profiting from an odd stock exchange environment, whereby investors were simply waiting to throw their money at something they had heard of.

“It’s been a very slow IPO market so far this year and investors have been on the sideline waiting for a new name, especially a new name that’s familiar,” said Sam Hamadeh, CEO of research firm Privco.

The company’s business model sees Etsy take a percentage of all sales made on the site, while also offering various services to its sellers, which include things like marketing and payment processing.

“We think that it’s a very interesting company and investors are going to like the growth they see,” said Kathleen Smith, IPO exchange-traded fund manager at IPO research firm Renaissance Capital.

Etsy image, via Scott Beale on Flickr

Gordon Hunt was a journalist with Silicon Republic