Monday, March 9, 2015

A Closer Look: Etsy Prepares to Go Public

Etsy by Jonah Engler

Any web company that follows a path that others have failed at over the years and builds a loyal following that nets it consistent and significant revenue has potential as an eventual IPO candidate.

So when Etsy, a online marketplace for craftspeople and vintage item sales announced after 10 years in existence that it was filing for an IPO that is hoped will allow it to build a war chest of around 100 million in investment dollars, it was not unexpected.

Of course the road behind it was not without fits and starts and some of the mistakes that were made as a private v. public company will likely need to be countered by stronger processes and better oversight. One example that has been bandied about is their propensity to have to restate earnings for multiple quarters in multiple years due to faulty accounting systems.

On balance, however, as a venue for salespeople, their 1.4 million strong network of users seems to prefer using them over some of their competitors who are less specialized. Apparently the specialization attracts more clients that know that they are probably the premier venue for the range of goods that they offer.

The only types of concern that seemed to be expressed by their users in a forum that was set up by company officials to discuss the recent announcement was that the perception of a stock market listed company brought with it historical baggage that might overturn their interest in being a good partner to the smallest of their clients.

As for the company, they are interested in ensuring that their accounting and reporting systems are working perfectly so that they do not have further problems when it comes to meeting the stringent requirements of Sarbanes Oxley.

Between now and the IPO, there may be some fluctuation in the expected share price, but with the economy continuing to move forward in the post-war era, investments in their infrastructure from monies realized in the IPO seem like a solid idea.

Etsy's revenue model is to charge the sellers, not the buyers a percentage of sales and a listing fee like a virtual mall. In place for several years, their firm managed to book revenues close to $200 million dollars last year.

Their IPO is going to be coordinated by Goldman Sachs and Morgan Stanley and should see them end up being listed on the Nasdaq.

Jonah Engler is a successful entrepreneur, investor, franchise owner and coffee lover who hails from New York City.

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