Online shopping marketplace Etsy pinned a positive start to its story as a public company, witnessing a near-doubling of its share price during a Nasdaq debut Thursday.
Shares of Etsy closed at $30, up 87.5% from its initial public offering price of $16 a share. The company's value soared to about $3.4 billion, falling in between the likes of hardware maker Logitech International and fellow e-commerce service Groupon Inc.
Etsy, which connects makers of handcrafted goods to buyers, is expected to use the $213 million that it received from the IPO to expand its worldwide audience of about 20 million buyers. But the Brooklyn company now will face pressure from public investors: It produces no profit, and it's unclear when it will.
The near-doubling is “a great outcome for the IPO,” said Gil Luria, a Wedbush Securities analyst who follows and regularly makes purchases on Etsy. “From here, what happens, though? The stock is trading at multiples that are well above any comparable that anyone can come up with.”
Etsy is valued at about 17 times its 2014 revenue of $196 million, which comes from commissions and other fees. Its net loss widened to $15 million last year.
The company pieced together a select group of initial investors and even took an unusual route by setting aside a small portion of shares for its users and other individuals at the $16 IPO price. Etsy also is certified as a B-Corporation, requiring it to maintain certain social and environmental standards set by an independent monitor. The B-Corporation status and self-selected investors should reduce the pressure on Etsy to produce profits. But analysts such as Luria worry Etsy won't be able to maintain a torrid pace of revenue growth.
The company began as a tiny project out of an apartment in 2005. By the end of 2014, Etsy had 685 employees, 51% of whom were women. More than 1.3 million makers of homespun clothing, handcrafted jewelry, unique furniture and other special items earned cash last year through Etsy.
They sold nearly $2 billion worth of goods in 2014. But that's a tiny slice of the growing e-commerce market, which is expected to surpass $1.5 trillion in worldwide sales in 2015, according to the research firm EMarketer.