The Etsy Inc. (Nasdaq: ETSY) IPO is one of the most talked about deals so far this year. It’s on track to becoming the biggest tech IPO for a New York-based company in 16 years.
According to Renaissance Capital, a manager of IPO-focused ETFs, the Etsy IPO price is set at a range of $14 to $16 a share.
The company commands a pre-IPO valuation of $1.8 billion. That makes it the third most valuable tech IPO – considered “tech” because of its role in e-commerce – this year behind Inovalon Holdings Inc. (Nasdaq: INOV) and GoDaddy Inc. (NYSE: GDDY).
Here’s everything you need to know about the Etsy IPO price and how it compares to other recent deals…
Etsy IPO Price Reflects the Company’s Culture
Etsy originally filed with the SEC to raise up to $100 million in its IPO. On March 31, the company changed its deal and will now raise $250 million by selling 16.7 million shares at the $14 to $16 price range.
The new terms set Etsy’s valuation at $1.8 billion. According to International Business Times, some analysts expect it to reach as high as $2 billion in the days leading up to the IPO.
Founded in a Brooklyn loft in 2005, the company started as a way for its founders to sell handmade wooden crafts. Now, users buy and sell everything from art and photography to food and bath products. It has grown steadily over its decade-long history, with 54 million members, 1.4 million active sellers, and 19.8 million active buyers around the world.
Etsy’s culture is ingrained in its B Corporation certification. B Lab, the non-profit that distributes the certifications, awards them to companies that meet certain social, environmental, transparency, and accountability standards. As part of its certification, Etsy offers employees bikes for their work commute and composts food wastes.
According to B Lab, there are 1,237 B Corp company across 121 industries and 38 countries. Etsy will be the largest B Corp company to issue an IPO.
These wholesome values are central to Etsy’s pitch as the company pursues investors on its IPO roadshow. Etsy’s management considers the well-being of the shareholders and community paramount to its success.
The company asks investors to embrace its mission to “do good” and do well – a mantra Wall Street isn’t accustomed to.
“It’s like a beautiful test in a way to see if it’s possible to have a mission beyond money,” said Rett Wallace, CEO of Triton Research, to Bloomberg. “You see these situations all the time where even 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.’”
The obligations are also reflected in the Etsy IPO price, which looks small next to recent tech IPOs…
How the Etsy IPO Price Compares to Other Deals
The Etsy IPO price of $14 to $16 a share is cheaper than the range of many other recent tech IPOs.
GoDaddy’s IPO last week had a $17 to $19 price range and ended up pricing higher at $20. Inovalon’s Feb. 11 debut soared above its $21 to $24 range and opened at $27. Alibaba Group Holding Ltd. (NYSE: BABA), which has a similar marketplace model as Etsy, priced above its $60 to $66 range at $68 and became the largest U.S. IPO ever.
The reason behind Etsy’s low price range is simple - the company isn’t profitable. In fact, the company admitted in its IPO filing that it may never be.
“We have a history of operating losses and we may not achieve or maintain profitability in the future,” the filing said.
Etsy’s sales numbers have been strong. It posted $195.6 million in 2014, a 56.4% increase from the previous year. In 2012, the company’s merchants sold $895.1 million in merchandise.
Yet the company still hasn’t turned a profit. The filing reported a net loss of $15.2 million in 2014, a giant increase from the $0.8 million net loss posted in 2013.
Etsy’s money comes mostly through fees users pay for transactions and listing items. The company plans on spending more after the IPO to cover additional hiring and marketing costs.
More on 2015 IPOs: There were more IPOs last year than any year since the height of the dot-com era in 2000. The tech sector is poised to dominate again as massive startups like Uber and Snapchat are rumored to go public. Here are 15 tech IPOs that will explode onto the market this year…
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