Will Etsy join the Wall Street Bulls and Bears?
All the press about Etsy’s possible IPO is still unconfirmed. Yes, major news publications are communicating about it, but Etsy or their supposed underwriters have not made any announcement yet. Nor have I seen any public regulatory filings.
The World Cares About How Etsy Sellers Respond
Marketwatch published this article titled, “Etsy’s own sellers unsure if they’d invest – in Etsy”. It communicates many of the negative reactions from Etsy sellers. In response one Etsy seller, Krystal Hacker commented,
“As a seller on Etsy since 2008, I’ve been ‘investing’ in Etsy the entire time. I am excited for an opportunity to further my investment in Etsy if they go public. I don’t understand why so many current Etsy sellers are against it. If you don’t trust Etsy to go public, why do you trust Etsy with your current business?”
Every Etsy seller has an initial reaction to this type of IPO news, because of the level of uncertainty it raises about the future. Change can be an opportunity to reevaluate the decisions you have made and will make in the future. You will either stick with your business’ investment in Etsy (while being happy or sad with all the possible IPO development), diversify your investment (look for other revenue streams/selling opportunities for your business, which is always a wise thing to do – Etsy IPO or not . . . think about your eggs in one basket), or sell your investment (remove your business from Etsy).
What are the Actual Steps in an Initial Public Offering?
I found this nice infographic from the NYSE. Etsy could be on a number of exchanges, but this still works for our purposes of understanding what might be happening behind the scenes.
Where might Etsy be in this process right now?
It looks like Etsy hasn’t gotten to step number 2 yet, of notifying the government by submitting its detailed S-1 disclosure document. How do I know this? I am not able to find to find the public disclosure on the SEC (Securities and Exchange Commission EDGAR database). You can see a listing of Etsy’s previous 9 filings with the SEC for previous funding that has taken place through the years here. It’s kind of interesting reading if you like financial forms – otherwise, not so much!
Has Etsy made the decision in step 1? Maybe or maybe not? If they have or are currently making the decision, they are probably thinking about a lot of the topics that are covered in this very complex guide published by PWC: Roadmap for an IPO. (the pros and cons, no turning back, the need for more capital, preparing for a successful offering, regulatory and disclosure issues, the process of going public, and the reality of life as a public company).
I did see in the reports that were coming out the past few days that Etsy was supposedly working with Goldman Sachs and Morgan Stanley. What might these two financial institutions be doing?
The Investment Bank?
John Jagerson, Learning Markets Analyst of Scottrade has a nice article, How IPOs Work and What Can Go Wrong. In it he states,
“The company starts the process by hiring an investment bank, also called an “underwriter” when pursuing an IPO. Since the company has a defined amount of capital it seeks to raise, the investment bank guarantees to buy all of the shares being issued in the IPO, thereby assuring that the company’s financing needs are met. The investment bank performs due diligence for a period of time to determine a range of fair market value for the company.
Larger IPO’s are often brought to market by a group of investment banks, together called a “syndicate”, to spread the risk and broaden the pool of investors with whom to place stock. The lead underwriter takes the majority position and has the responsibility for placing most of the stock.”
These two could possibly be the investment bank, together called the “syndicate”.
What would we see next from Etsy/the “syndicate”?
Jargerson explains the Letter of Intent and S-1 process:
“The underwriting firm will issue a letter of intent once the due diligence process is completed. This outlines the terms of the IPO deal: estimate of the company’s value, range of the offering price per share, amount of money to be raised, fees, number of shares to be issued, etc. It is typical for investment banks to receive 6-7% of the gross proceeds raised in the offering, although these fees decline for larger deals.
If the company agrees to the terms in the letter of intent, it begins preparing an in-depth disclosure statement called the S-1. This is the IPO’s prospectus as well as the registration document that gets filed with the SEC in preparation to offer securities to the public. It is designed to be a deep-dive into the company’s financial condition and to provide as much information as possible to prospective investors about their business model.”
So, we are waiting for the S-1 filing or confirmation that isn’t still from “private anonymous sources”.
So Etsy seller, what should you do today?
Keep improving your business on and off of Etsy! This is your job every other single day and nothing has changed yet.
Yes, stay informed about the IPO, but more importantly, what are you doing to improve your business’ performance?
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Make sure you like Etsy-preneurship on Facebook to stay abreast of any Etsy IPO news and its impact to your Etsy shop. This Summary Post (Everything an Etsy Seller Needs to Know About Etsy SEO) will be my centralized location for all updates.