What is Poshmark, the secondhand retail app going public?

The interest from investors has already led to significant hype for Poshmark shares, increasing both the value of the platform and its chances of future success.

American secondhand marketplace Poshmark Inc. is rapidly becoming a staple in online commerce.

Founded in 2011 by Manish Chandra, the marketplace was designed as an outlet for reselling – typically women’s – secondhand clothing.

Early investors in the platform included Hollywood actor Ashton Kutcher and fashion designer Rachel Zoe.

The company boasts some 70 million registered users across the United States and Canada, as well as 200 million plus items on sale, with a sale being made every second in the US.

Having announced it finally achieved profitability in 2020 – albeit on slim margins – Poshmark has now gone public with investors. Plans were laid in September 2020, before the platform finally went public in January.

The interest from investors has already led to significant hype for Poshmark shares, increasing both the value of the platform and its chances of future success.

Founding

Before Poshmark, Manish Chandra saw a lot of “women trying to buy and sell fashion, but it was inefficient.” For example, “there were no easy transactions or ways to share images.”

Soon, Chandra, who previously had founded the social shopping platform Kaboodle, had decided to establish Poshmark “to do something mobile with fashion.”

By 2013, the platform had begun to process more than 1.5 million transactions annually and was but one of a growing number of online retailers focused on secondhand goods such as clothing.

With over 70 million members, Poshmark allows users in the US and Canada to list their items for sale with photos, attend (currently virtual because of the COVID-19 pandemic) shopping parties and connect with other Poshmark users. Poshmark emphasizes its social connectivity and its ability to connect sellers and buyers better than other platforms.

Poshmark was but one platform to benefit from the conditions created by the pandemic in 2020 and saw significant sales due to the increase in people shopping and buying second hand during the lockdown.

Unlike many high end retailers that have suffered as a result of the decrease in foot traffic during the pandemic, Poshmark’s only physical inventory belongs to its sellers – ordinary people who use Poshmark to retail their secondhand (or sometimes new) clothing and other items.

In September, Poshmark announced it had filed for an initial public offering (IPO), bringing the California-based company to the market for the first time.

In its filing documents, Poshmark disclosed a net income of US$21 million on revenue of US$193 million for the nine months ending September 2020.

This was in contrast to a net loss of US$34 million on US$150 million in revenue the previous year, illustrating significant growth for the platform in its push toward becoming profitable.

Poshmark planned to offer 6.6 million shares in the company between US$35 and US$39 apiece, which could have provided Poshmark with a market value of around US$2.9 billion.

Successful IPO

When the IPO came in January, however, Poshmark exceeded its own expectations.

In its public offering, Poshmark share value jumped some 142%, as investors scrambled to acquire a piece of the secondhand online marketplace platform.

That demand meant Poshmark raised some US$277 million its trading debut, with shares closing at US$101, significantly higher than the original share price. This meant Poshmark achieved a market value of more than US$7.1 billion in its first day of public trading.

Speaking to Bloomberg on the successful first days of trading, Poshmark founder and chief executive officer Manish Chandra said he had remained “focused very much on the long term” and “focused on our mission to serve the community and build out a great social marketplace and just continue to grow and serve.”

Nonetheless, Chandra said he was confident about the future of e-commerce shopping “now and for the next decade,” believing Poshmark to be well-placed to take advantage of developing trends in the industry.

Poshmark is not alone in going public, however. California-based secondhand clothing retailer ThredUp Inc. filed in October to go public and is a close rival of Poshmark.

The retailer was aiming to raise between US$200 and US$300 million in its offering, roughly similar to the amount raised by Poshmark.

Poshmark did, however, warn investors that it could not “assure you that we will maintain our profitability in future periods, and we may incur significant losses in future periods.”

For now, Poshmark can enjoy the benefits of having pulled off a successful first entrance into the public markets.

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