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Etsy (NASDAQ: ETSY) is working with Goldman Sachs on reviewing its strategic and operational plans, said two sources following the situation.
The review is at an early stage as new management is still “figuring out what makes sense”, said a person familiar with the situation.
The New York-based online marketplace worked with Goldman and Morgan Stanley on a successful IPO in April 2015. Shares were priced at USD 16 and opened at USD 31 in market debut.
But Etsy’s honeymoon with investors quickly ended. In early May, Black & White Capital urged the company to find ways to maximize value, including exploring a sale, as its share price had tumbled more than 30% since its IPO amid a challenging operating environment. The company trades at USD 13.26 in today’s session, for a market cap of USD 1.55bn.
Internet retailing is a crowded space and stocks are suffering, an industry advisor said.
Besides poor price performance, the insurgent complained about Etsy’s growth slowdown, as well as operational and corporate governance issues.
This news service reported that Etsy was at risk of being targeted by an activist in December 2016 as it was underperforming.
The company quickly appointed a new CEO, Director Josh Silverman, in response to the activist threat, completing a senior management reshuffle initiated in April with the hire of new CFO Rachel Glaser.
Among other roles, Silverman co-founded Evite, held various executive roles at eBay [NASDAQ:EBAY], and was the CEO of Skype and Shopping.com, according to Etsy’s website. The board of six members is chaired by lead independent director Fred Wilson, founder of Union Square Ventures.
But the move failed to prevent other agitators from popping up. Private equity firm TPG Group Holding and Dragoneer Investment Group said in separate 13D filings on 15 May they were forming a group, collectively holding 8% of the shares, to engage in discussions with the company. Etsy responded by launching the review on that same day.
Etsy received pitches from other banks to successfully fend off the activists, a second sector advisor said. But the company appears to be well covered on defense advisory, the person said.
TPG’s investment was surprising, a third sector advisor said. Market participants have been wondering if it could be a first step in potentially making a bid in what would be an unusual move for private equity, he noted.
In announcing the review, Silverman said Etsy would prudently invest in higher-return areas, as well as tapping opportunities to scale its marketplace business model and driving efficiencies, while seeking operational excellence and focused execution.
Dragoneer has worked with TPG before, including in a funding round for home-rental site Airbnb.
Etsy declined to comment. Goldman Sachs did not respond to a request for comment.
by David Carnevali
As seen in the mergermarket newsletter on 12/06/2017