What to Know About Wish’s 2020 IPO
Amazon isn’t the only e-commerce giant in the US. After all, the e-commerce industry itself was worth $2.1 trillion in 2019, and that number may double soon. Wish has managed to hit unicorn status—a startup with a valuation exceeding $1 billion—since it was founded in 2010. Now, the company is going public. Here’s what to know about the Wish IPO, including when to expect the Wish IPO date and what investors ought to know about the company becoming publicly traded in an IPO-rich landscape.
- Wish is led by founder, chairman, and CEO Peter Szulczeski.
- The e-commerce company caters to low-income families and individuals, something that differentiates themselves from competitors.
- They saw a 32% YoY revenue growth in the first nine months of 2020.
- Wish will sell 46 million shares at $22–$24 a piece. This could make the IPO worth as much as $1.1 billion, bringing the company’s total valuation to $14.07 billion.
- Goldman Sachs & Co., JPMorgan Chase & Co., and Bank of America Securities are serving as lead underwriters for the Wish IPO.
- Wish has been called out for unsatisfactory products, plus they have yet to hit a profit. Investors should always do their due diligence.
- You can learn more about IPOs here.
A quick company history of Wish
While Wish’s parent company (ContextLogic, Inc.) is based in San Francisco, California, the e-commerce site functions by selling Asian goods from 500,000 sellers. They maintain a presence across 100 countries and boast an impressive 100 million active monthly users. Meanwhile, Wish merchants sell 1.8 million items each day.
The platform differs from Amazon in that it includes people from lower socioeconomic backgrounds in their target audience. Consider the fact that Amazon Prime costs $119 per year to join. This is not a feasible fee for everyone. Wish intends to continue catering to people whose needs may not be met by Amazon.
“We believe that the next billion e-commerce customers will be these value-conscious consumers.” – Wish prospectus
Here are the three types of services Wish provides:
- Sell on Wish
- Wish Local
- Wish App
The company has been around since it first incorporated into the tax-haven state of Delaware, where there are more incorporated businesses than there are people. (Fun fact: All 1.5 million+ of these companies are held in P.O. boxes on Orange Street in Wilmington.)
Founder Peter Szulczeski currently serves as CEO and chairman for Wish. At 39 years old, he’s worked in various roles at Google. Szulczeski’s fellow executives at Wish also have storied resumes. The general counsel Devang Shah once worked at Zynga.
In 2017, the company partnered with the NBA’s LA Lakers in a multi-year contract, just one of their marketing campaigns in recent years.
By 2019, Wish hit a $1.9 billion revenue. That was a 10% year over year increase for the company. But while that improvement is impressive, it’s actually on the low end for Wish. The year prior, they saw a 57% year over year revenue boost. And for the first nine months of 2020, they managed to improve their revenue by a rate of 32%. They did this by hitting $1.75 billion in revenue before the start of the fourth quarter.
In the last half a decade, Wish has grown at a compound annual rate of 90%. And for the past three years, it has held its spot as the top downloaded shopping app.
Before talk of an IPO, Wish went through a handful of funding rounds. In May 2017, they earned half a billion dollars from corporate investors. Another institutional round came just months later in September 2017, when Wish got $250,000,000.
Wish achieved Series H funding by August 2019. General Atlantic, an American equity firm, led the round and helped take Wish’s assets all the way up to $11.2 billion.
Other noteworthy Wish investors include JD.com, Temasek, Legend Capital, Founders Fund, Alibaba, and Spotify. You may notice that JD.com and Alibaba are both competitors of Wish. However, even these beasts recognize the company’s lucrative potential.
Path to the Wish IPO
Wish officially filed their form S-1 (AKA registration statement) with the SEC in August, but they made the documents public on November 20, 2020.
Like any business going public, Wish hasn’t made the trek alone. They have underwriters to back them up, namely Goldman Sachs & Co., JPMorgan Chase & Co., and Bank of America Securities.
Underwriters help a company to set the number of shares and price per share. They also help court institutional investors. In most cases, an underwriter declares a firm agreement with the company, which means they fund the shares themselves and take on the risk of selling them off.
Next steps for the Wish IPO
When it comes time for Wish to roll back the curtains on its public offering, the company will trade on the Nasdaq Exchange under the ticker symbol “WISH”.
Initially, Wish kept its number of shares and price per share on the hush. However, they announced their metrics on December 7, 2020 via an amended registration statement. As of this date, Wish plans to sell 46 million Class A shares in their IPO. Meanwhile, they plan to price these shares at $22–$24 each. This means their IPO could be valued as much as $1.1 billion.
Class B shareholders will hold a hefty 82% voting power. Meanwhile, Szulczewski can choose to hold his 59.3% voting power.
After the IPO, Wish will still have more than half a million outstanding Class A and Class B shares. These will likely trade in the secondary market and could increase the IPO’s valuation by a lot. Plus, underwriters could support an additional 6.9 million shares if they choose.
At the very most, Wish could see a fresh influx of capital that brings them to a valuation up to $14.07 billion. For comparison’s sake, Amazon has a market capitalization of $1.58 trillion. Alibaba’s market cap is $714.94 billion.
When is the Wish IPO date?
Wish has yet to disclose a date for the initial public offering. However, the process is moving along in the right direction. Since they have released information regarding how many shares they hope to sell and a price range for each of those shares, the next move is setting a market debut.
What investors should know
Believe it or not, it’s actually pretty common for supremely successful companies to run shy of profit. We’re seeing it right now with DoorDash, a company that’s en route to an IPO while maintaining a net loss. In their S-1, Wish reported a net loss of $176 million in the first nine months of 2020.
Despite its commonality, a lack of profit is still something to be aware of in a company you want to help fund. IPOs tend to bring more volatility than regular stocks, and a company in the red may be more prone to high swings as quarterly earnings reports begin to roll in. Wish already sees uneven losses, despite their growing revenue.
If you plan on investing in the Wish IPO, it’s a smart move to get a sense for the company by reviewing the S-1. You can find the document here. As you read the S-1, look out for these pieces of information:
- Revenue: How much money is the company making?
- Cost of revenue: How much does the earned money cost the business?
- Operating costs: What it takes for the company to keep itself running
- Profit: How much revenue is left after subtracting costs?
You can find all of this information on the S-1’s income statement, which is a blue and white lined chart with information from the year to date. For Wish in particular, this income statement starts on page 17 of the document.
One more thing investors should know about the Wish IPO: Wish has often been accused of selling counterfeit or poor-quality products. Since the company works with independent merchants, they’re working on processes to weed out the unsatisfactory sellers. One such method is through a 10,000-person-strong community led by Facebook’s Connie Chang, in which users can expose dealers who’ve wronged them.
Amazon’s holiday commercial for 2020 is a bit of a masterpiece, but its mere existence is evidence that the e-commerce giant doesn’t hold the market in the palm of its hand. If that were the case, they wouldn’t be spending so much on marketing. Currently, Wish only has a little over 50% of Amazon’s user base—but once a company gets big enough, they tend to grow more rapidly.
For Wish, an IPO is bound to put them on more even ground with their e-commerce competition. For investors, it provides more opportunity to diversify within the sector, and that’s nothing to complain about. Just be sure to stay up to date on earnings calls, industry news, and the risks of IPO investing.
Related: How to read an earnings report