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Poshmark shares surge in public debut

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Poshmark shares doubled in their company’s stock market debut on Thursday. Yahoo Finance’s Brian Sozzi shares the details.

Video Transcript

MYLES UDLAND: All right, we'll go back to "Yahoo Finance Live." Stocks lower on this Friday morning, though, off of session lows we saw in the futures before today's open. But let's keep our attention on one stock that is off significantly today, and that is Poshmark, the stock is off about 9% in its first full day of trading after the company completed its IPO ahead of yesterday's trading session.

Now, the stock more than doubled, priced at $49 per share in the IPO, got a huge pop, as we've seen from so many new issues as it began trading. Brian Sozzi, an interesting name here hitting a couple of different themes, not only kind of the tech enthusiasm theme, it's more of a consumer brand people know of Poshmark. And also, the future of retail as well in there.

BRIAN SOZZI: Yeah, really a resounding response market debut for Poshmark, Myles and Julie. The stock rose 141% by the closing bell yesterday, really, I think, blowing away a lot of people-- a lot of Wall Street estimates and where this thing could open, clearly. But the key to the story and perhaps overlooked is that Poshmark is coming to market as a profitable entity.

$10.8 million in profits for the quarter ended September 30, despite the effects of the pandemic. Now, I asked Poshmark CEO Manish Chandra yesterday in an interview as he was watching the stock go through the roof how those profits are happening right now. Take a listen.

MANISH CHANDRA: For us, I think our focus has been as an asset light marketplace, empowering buyers and sellers to buy and sell directly, really focusing on community. And that ultimately leads to long-term cohort retention, long-term engagement, and that, you know, profit is really a consequence of building a business when buyers and sellers and the community comes together.

So for our social marketplace, the key is remaining asset light and focusing on that deep engagement. Our users spend about 27 minutes a day on the platform every day.

BRIAN SOZZI: It's a whole lot of time. And asset light, what he means by that, they don't hold any inventory. They just serve as a marketplace. But now that that stock-- now that the stock has had such a tremendous reception, it's critical that they keep the momentum going.

So I added-- or I made up a list of three things I think you, as an investor, if you're in this stock now, you need to look out for and you want to see from Poshmark in the months ahead. First up, you want to see accelerating profits. It's great that they had $10.8 million in profits for the quarter and in September 30, that's great.

You want to see that continue to build, I would say, at a faster growth rate than when they came to market. Very critical, it's no longer acceptable that they are a profitable entity. They have to grow a lot quicker.

Next up, I think they do need to detail to the Street their content policing efforts and what they're doing. By that, I mean, you can go into Poshmark right now and you can buy a whole ton of MAGA gear, whether you like it or not. It's on the platform, they have not taken it off. Chandra didn't want to dive deep into this when I asked about it yesterday. Nonetheless, it's something to watch going forward, especially in this day and age.

And then last but not least, you know, Poshmark takes a cut of each item that is sold, and it's like 20% on each sale over $15. That's their cut. They get a flat $2.95 fee for items sold under $15.

What the market reception says now, guys, is that Wall Street wants to see that fee taken up even higher. There's no indication that they will do this. This is just what the Street wants to see. I suspect Poshmark will come under pressure in coming quarters because of the market reception to raise those fees.

MYLES UDLAND: It's funny that you outline the future of Poshmark, they need to raise those fees, Sozzi, because when you said that, I thought, seems a little high. But then again, I don't really sell my stuff on the internet. So I'm not really sure what the right fee for that would be. But again, an interesting story to follow as we get into this year. All right--