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Poshmark Stock Climbs 142% Above IPO Price

Another IPO proceeds to boom.
(NYC Russ)
(NYC Russ)
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Secondhand clothing marketplace Poshmark posted a strong debut during its first day of trading Thursday, The Information reports.

Why It Matters: Poshmark shares doubled from their IPO price of $42 to open at $97.50. The stock soared as high as $104.98 and ended up finishing the day at $101.50, a 142% improvement. In December, DoorDash and Airbnb hit the public market and saw massive first-day gains. Poshmark is the latest to follow the trend, and its early success “is sure to add fuel to the debate over IPO pricing.”

  • All of this comes on the heels of 2020, a “record year for the amount of capital raised in U.S. IPOs.”

Numbers To Consider:

  1. The first-day price gave Poshmark a market capitalization of $7.4 billion.
  2. That’s a 494% premium on its $1.25 billion private valuation from early 2019.

Meanwhile, ContextLogic (the parent company of Wish) and Affirm rode the wave of IPOs as well. ContextLogic and Affirm rose 17.6% and 18.2%, respectively, on Thursday.

Looking Ahead: For tech IPOs in 2021, this looks to be only the beginning. Poshmark’s success “indicates confidence” for other tech firms considering a similar path.

Justin Oh:

At today’s share price of $76, Poshmark ($POSH) carries an enterprise valuation of $5.1 billion. 

Poshmark had $247 million in Revenue and $206 million in Gross Profit during the latest 12 month period. 

  • Revenues are growing at 28%, but we should also keep in mind that they are benefiting from the e-commerce boost during the pandemic. 

At the current valuation and assuming they continue their 28% growth rate, $POSH is trading at 19.5x forward Gross Profit.

  • This is not an outrageous valuation and we hold a couple stocks at similar valuation levels on the Big Board.

I do not believe that clothing marketplaces are not dominant and sticky businesses compared to other types of online platforms, so the valuation doesn’t look particularly attractive to me at this point.

  • If the stock continues to fall, though, we might take a closer look.
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