What to know about Poshmark’s 2020 IPO

Because of its environmental and social implications, fast fashion has never been so uncool. Poshmark, on the other hand, is realizing a different fate. A buy-and-sell platform for mostly used clothing and accessories, the app promotes affordable thrifting amid a circular economy. With news of a Poshmark IPO (initial public offering) on the horizon, here’s what we know about their route to the publicly traded world — plus a little Poshmark history, key insights for investors and a potential Poshmark IPO date.

TL;DR

  • Poshmark is a self-proclaimed social commerce marketplace that’s already attracted 100 million resale transactions and 60 million users.
  • They have raised a total of $160 million in fundraising, most of which came from a late-stage round in 2017 worth $87.5 million.
  • The company’s latest valuation says they’re worth $625 million.
  • Poshmark has filed their IPO confidentially, which means we don’t yet know how many shares they’re offering, nor at which price. Investors will have to wait until the company goes public to get their hands on its financial history.
  • The Poshmark IPO date is dependent on the SEC review process and market conditions.
  • Poshmark’s biggest competitors are Depop and ThredUp, the latter of which plans to file for its own IPO in early 2021.
  • You can learn more about IPOs here.

A quick history of Poshmark

Founded in 2011, Poshmark is led by CEO Manish Chandra (he was worth more than $30 million as of 2019). The company is headquartered in Redwood City, California, and executives refer to it as a “social commerce marketplace” above all else. They make money from fees attached to each sale.

In February 2019, famed tennis professional Serena Williams joined the Poshmark board of directors. Users can shop her personal closet, which is chock full of both baby and adult clothes at a discount.

The company did endure a data breach last year where an unauthorized third party gained access to a selection of information, but they — and their users — securely overcame the hurdle.

By February 2020, Poshmark reported 100 million transactions of resale items and 60 million users across the United States and Canada. Break it down even further and there is one sale happening every second on the platform.

Poshmark’s target audience is Gen Z, but users run the gamut (with Baby Boomers actually buying higher end products off the platform, and spending more per item).

This year, Poshmark released an extensive study divulging the latest social commerce trends. They figured out a ton, but these are the key takeaways:

  • In 2019, 48% of Poshmark sellers used part of their earnings to make their own Poshmark purchases.
  • 92% of Poshmark users sold items on the platform that they couldn’t return to the original retail outlet
  • A quarter of all Poshmark users consider themselves small business owners.

What is Poshmark’s fundraising history?

As of 2020, Poshmark has been around for less than a decade — but that hasn’t stopped the company from acquiring capital through fruitful fundraising.

The main Poshmark fundraising round was a late-stage event in November 2017, when they received $87.5 million from GGV Capital, Uncork Capital and Mayfield Fund (all of which are venture-based firms who focus on startups or companies with potential long-term value).

Other investors include:

  • Menlo Ventures
  • Inventus Capital Partners
  • Union Grove Venture Partners
  • J.F. Shea Co., Inc.
  • SV Angel Management
  • Ashton Kutcher and Guy Oseary of A-Grade Investments
  • Rachel Zoe

All in all, Poshmark has raked in $160 million in fundraising. As of its last public valuation in 2017, the company is estimated to be worth $625 million.

Path to the Poshmark IPO

For Poshmark, the last couple of years have been growth-inducing, and that isn’t accidental. Initially, they planned to go public in 2019. However, the company decided to focus their efforts on providing Poshmark users with a more holistic experience and improve sales.

Poshmark Home came into being in June 2019, providing users with a platform to buy and sell home goods. This moved the company away from solely offering clothing and accessories into a more diverse (and revenue-inducing) domain.

In April 2020, the company released Posh Stories, a feature that allows users to develop videos to market their products. Ultimately, these shoppable videos help increase earnings for sellers and Poshmark alike. They also help buyers find the products with greater ease.

Poshmark announced their IPO in a press release on September 25, 2020, which shared they will be offering their Class A common stock to the public in the future. They have confidentially filed their form S-1 (registration statement) with the SEC. Their news comes after a whole slew of companies announced their own IPOs — like Snowflake, GoodRX, Unity and more.

Next steps for the Poshmark IPO

Poshmark has confidentially filed with the SEC. This move is far from unheard of — other companies like Airbnb and Palantir have recently done the same. As a result, the company has yet to divulge the number of shares they’re offering and the price per share.

Companies choose to file confidentially for two main reasons:

  1. They want to protect their financial history from competitors while the SEC goes about its review process.
  2. They wish to keep employees on track, without the distraction that tends to accompany a publicized IPO of an already well-known company.

Once a company files their form S-1, it’s up to the SEC to review their extensive documentation. Depending on the circumstances, the SEC’s process can take just a month (or less) to more than a year.

When is the Poshmark IPO date?

In their press release, Poshmark shares that their IPO date is contingent on the SEC’s review process and market conditions. This does leave things a bit open ended, but 2020 has shown us that many companies are eager to launch into the market sooner rather than later.

What investors should know

The potential pros of a Poshmark IPO include its confirmed position in both the digital and environmental markets. A fully digitized presence puts Poshmark at an advantage in the socially distanced landscape of the modern day (plus, 75% of people are comfortable ordering items directly from someone online, according to Poshmark). This could help Poshmark function when we don’t know what the future looks like.

All the while, they’re in a sustainable position. This California company knows all too well the dangers of climate change, and they should be able to intrigue a number of socially responsible investors.

As for the risks of a Poshmark IPO, the company has competition. Poshmark is far from the only player in the game. Some of its most prominent competitors are already in talks of going public, namely ThredUp.

ThredUp — who expects to roll out a $200–300 million IPO in early 2021 — currently partners with major brands like Gap and Walmart. They also won 2019 Disruptor of the Year by RetailDive. Since they have already shared a potential valuation for their IPO and made a public call for underwriter proposals, it likely won’t be a confidential filing.

Depop is one of Poshmark’s most direct competitors. The two platforms operate essentially the same, but Poshmark admittedly has more features to its name. Depop has not filed for an IPO, though they did receive a hefty $62 million Series C funding round last year — so it’s not out of the question.

Since the Poshmark IPO is a confidential filing, investors don’t have access to financial documents that could potentially provide more insight into the company. This makes an IPO investment riskier.

Pros and cons of a Poshmark IPO aside, IPOs are historically riskier than typical investments. Many experts say that shares tend to be overpriced at the start of a company’s public presence. In addition, costs can fluctuate rapidly (check out Asana’s new chart for reference). It’s ultimately up to an investor’s discretion whether they choose to bite, but it’s crucial to know what you’re getting yourself into.

Bottom line

The investment landscape evolves with market demand. The more people crave commerce that aligns with a sustainable future, the more companies are going to deliver. Public.com sees this firsthand through some of the 50+ investment themes on our app, including Reuse & Reduce, Combat Carbon and Do the Right Thing.

As the Poshmark IPO becomes a reality, it’s important for traders to understand the demand, delivery and potential downfalls that may accompany an investment in the Poshmark IPO.

Rachel Curry is Pennsylvania-based content writer and journalist talking all things finance. She likes to give meaning to numbers by humanizing them. You can connect with her on Twitter at @writingsofrach.

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