Poshmark IPO Heats Up, Demand for Used Goods Increases

The U.S. IPO market looks set to continue its positive momentum in 2021. Roblox, which delayed its IPO last year in a bid to increase the pricing, has opted for a direct listing. Poshmark, an online marketplace for used goods, is listing through the traditional IPO route. The company has announced the IPO pricing range. When is Poshmark going public and will the IPO deliver good returns for investors?

Poshmark has set the IPO pricing between $35 and $39 and intends to sell 6.6 million shares. The California-based company could raise up to $257.4 million from the IPO.

Poshmark isn't a publicly-traded company yet. The company filed for an IPO confidentially in September 2020 and then filed the S-1 in December. Poshmark is expected to finalize the IPO pricing next week.

In Poshmark's filing, it didn't specify the IPO date. However, the company said that it would proceed with the listing as soon as it's practically possible. The company should list sometime later this month based on the past experience of the companies that have come up with their IPOs. Also, given the current euphoria in the markets, the company might not want to delay the IPO any further.

According to Renaissance Capital, at the midpoint of the IPO price range, Poshmark is valued at $3.1 billion on a fully diluted basis. Poshmark reported revenues of $205.2 million in 2019 — a YoY increase of 38 percent. Its revenues increased by 28 percent YoY in the nine-month period ended September 30, 2020. Looking at the mid-point of Poshmark’s IPO price range, it's looking at a 2019 price-to-sales multiple of 15x.

Poshmark was losing money until last year. The company posted a net loss of $14.5 million in 2018, which swelled to $48.5 million in 2019. However, the company posted a net profit of $21.3 million in the nine-month period ended Sep. 30. 

While Poshmark has turned profitable, most of the companies that listed in 2020, including Snowflake where Berkshire Hathaway also co-invested, are making losses. However, the losses haven't damped investor sentiments. Most of the IPOs in 2020 delivered good listing returns.

Poshmark's growth rates have come down over the last few years, which could be a concern. However, the company managed to turnaround on the profitability level and posted profits. Looking at Poshmark's filings, its marketing expense fell sharply in the first nine months of 2020, which helped it post a profit in the period.

Overall, Poshmark looks like a good IPO to buy. The company has over 70 million users and a total gross merchandise value of $4 billion. The demand for used products is expected to keep rising as more people sell used goods to raise money amid the continued economic pain from the COVID-19 pandemic.