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Tank Alert: Did Etsy IPO Too Soon?

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Tank Alert: Did Etsy IPO Too Soon?
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Etsy Inc (NASDAQ: ETSY) is ailing. The peer-to-peer ecommerce site tumbled 28 percent on Wednesday after investors reacted to worse-than-expected Q2 earnings.

The company has had a rough first few months on the NASDAQ. Trading under $14 per share, Etsy is now pegged by the market as worth less than half of its $30/share IPO close. So did Etsy go public too early?

Well, according to Atish Davda, CEO of EquityZen, Etsy was actually much later to IPO than similar companies such as Amazon.com, Inc. (NASDAQ: AMZN). While Etsy became publicly listed a decade after its initial founding and with revenues of about $200 million, Amazon went public after only 4 years and revenues of $16 million.

"This is a profound shift that has occurred over the past decade," Davda said. "Companies staying private longer."

There are three main reason why this trend has developed, the EquityZen founder explained. First of all, "public markets [have] raised the bar to IPO." As a result, "companies need more capital in private markets to deliver proof" that they're ready for the big leagues. Simultaneously, he said, more capital has opened up in private markets, meaning that firms can sell more equity before having to go public.

Davda maintained that it would be too soon to judge whether Etsy's IPO was premature until the company's lock-up agreement expires in October and insiders are able to sell their stock.

Latest Ratings for ETSY

DateFirmActionFromTo
Jul 2017Morgan StanleyMaintainsEqual-Weight
May 2017CitigroupDowngradesBuyNeutral
May 2017Loop CapitalDowngradesBuyHold

View More Analyst Ratings for ETSY
View the Latest Analyst Ratings

Posted-In: Amazon.com Inc. Atish Davda Etsy Inc.Analyst Color News IPOs Analyst Ratings Movers Best of Benzinga

 

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