ETSY IPO Doubles In Early Trading
Etsy launched its much anticipated IPO on the NASDAQ today (Thursday, April 16th) under the symbol ETSY, and quickly became the hottest stock in town, more than doubling its value in early trading.
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The Etsy IPO initial sale price was announced yesterday as $16/share, on the high end of the $10-$16/share that had been indicated in the company's SEC registration for the offering. By market open this morning, the price had jumped to $31 per share. In early trading, the share climbed as high as $35.74 before settling at $30 to close the day. (At publication time, ETSY has dropped to $29.25 in after hours trading.)
With an initial sale of nearly 16.7 million shares, the IPO valued Etsy at $1.8 billion. The increased share price in first day trading now puts the company's book value at well over $3 billion, according to stock analysts.
Silicon Valley venture capitalist Tim Draper told CNBC today that the huge first day increase in stock value was proof that the stock was underpriced by the investment bank running the IPO: "The bankers are pricing these things way too low and it's clear the market is very interested in new technology companies and this is a great time."
In its post-IPO era, Etsy will face the challenge of juggling the inherent conflict of being a large corporate entity that must cater to institutional shareholders with catering to a customer base of small vendors. This conflict has already raised itself pre-IPO when in an attempt to grow its business, Etsy amended the site's rules to allow the sale of items that aren't handmade in vendors' stores. This has lead to an explosion of Etsy stores selling manufactured goods, leaving many handmade vendors feeling crowded out and looking for alternatives to the Etsy platform.
To counter this, Etsy did try to cater to its small business owner customers in its IPO offering. With the help of Morgan Stanley, the company offered a program for the IPO that allowed purchase of up to $2,500 of Etsy stock by small buyers. Ironically this attempt to make peace further enhanced the tug of war between the company's customer base and its institutional investors. The program's popularity limited the amount of stock available to the large institutional investors, and the Wall Street Journal is reporting this shortage irritated some institutional buyers.
