When South Korean tech giant Naver confirmed earlier this week that it would buy Poshmark Inc. for $17.90 a share, many observers thought the offer was fair.
Was it? After all, Poshmark — an Instagram-like website that specializes in apparel resale — went public in 2021 for $42 a share. On Friday it closed at $17.76.
Here’s a look at why the Redwood City, California-based company fell in value.
What happened
For the past three months, analysts have been offering 12-month price targets for Poshmark, giving it an average of $15.38 with a high of $17.50 and a low of $11. Naver’s offer, which is generous compared to this offer, values Poshmark at $1.6 billion.
That’s a huge discount from the company’s peak market cap of $7.3 billion when it went public in January 2021.
Led by founder and CEO Manish Chandra, Poshmark’s losses spiraled and revenue growth slowed over the past year or so. In July 2021, Stifel analyst Scott Devitt upgraded Poshmark’s rating to buy from hold, while maintaining a $50 target price.
But as of August 11, 2021, the company’s stock was hovering around $30.65. At the time, that was an all-time low.
Poshmark’s stock price continued to slide as it lost much of the shine it enjoyed during the COVID-19 pandemic, when customers turned to the internet for all their shopping needs. It also faces stiff competition from eBay Inc., Meta Platforms Inc.’s Facebook Marketplace, ThredUp Inc., and The RealReal.
As it missed gains in March, shares fell 71.09 percent.
Why it matters
Naver’s acquisition of Poshmark comes at a time when companies on the auction block are selling at a deep discount and M&A activity has generally slowed due to a looming global recession.
Transaction volume is expected to fall for the sixth straight quarter, according to Bloomberg, which is in line with similar levels seen at the start of the COVID-19 pandemic.
Poshmark, which advertises to 80 million users, may be able to benefit from Naver’s own discovery-based purchasing platform without having to worry about market volatility as a public company.
Whether the deal inspires other buyers to consider RealReal or ThredUp as cheap M&A targets remains to be seen. Like Poshmark, both companies are trading well below their share prices at the time of their 2021 IPOs.
By Anthony Noto
© 2022 The Epoch Times. The Epoch Times does not provide investment advice. All rights reserved.
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