Etsy IPO Price Range Factors In Revenue, Culture, Other IPOs

etsy ipo price rangeThe Etsy IPO price range is $14 to $16 - and the final Etsy IPO price will be announced today after market close.

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 Etsy IPO is valued at $1.8 billion - which is yielding skepticism because of the company's lack of profits.

The biggest factors affecting the Etsy IPO price range include revenue and expenses, company culture, other tech IPOs, and investor interest.

Here's a closer look at each.

Etsy IPO Price Range Factors

Etsy Company Culture: 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 nonprofit 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.

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.'"

Etsy IPO Price Range and Revenue: Etsy's sales and revenue numbers have been strong over the last few years.

Etsy ipo priceEtsy's revenue numbers have seen an annual revenue growth rate of 72% since 2006. The company posted $195.6 million last year, a 56.4% increase from 2013.

Etsy merchants sold $895.1 million worth of items in 2012. That number soared 116% since then, hitting $1.93 billion in 2014.

According to the "Etsy Weather Report" - the company's monthly site-wide statistics - advertising and payment processing make up nearly 80% of Etsy's revenue. Transaction and listings fees make up 55% of revenue and have grown 60% year over year since 2006.

But Etsy's operating expenses have also climbed. Total expenses soared 149% between 2012 and 2014. They jumped 67.6% from 2013 to 2014 alone, totaling $76.5 million in 2013 and $128.2 million in 2014. These numbers are projected to keep growing, which is risky for the company and prospective Etsy stock investors.

"We expect that our operating expenses will increase substantially as we hire additional employees, increase our marketing efforts, expand our operations, and continue to invest in the development of our platform," Etsy's IPO filing explained. "These efforts may be more costly than we expect and our revenue may not increase sufficiently to offset these additional expenses."

These growing losses have made Etsy less valuable than other recent IPOs...

etsy ipoEtsy IPO Price Range Compared to Other Tech IPOs: 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 projected 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.

The Bottom Line: The low Etsy IPO price range is a direct result of the company's struggle to balance its dedication to the community and to its business. As the company's future profitability remains skeptical, the Etsy IPO doesn't have a strong foundation moving forward.

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