Yahoo Finance’s Zack Guzman and Akiko Fujita speak with Poshmark CEO Manish Chandra about the company’s Nasdaq listing.
ZACK GUZMAN: Just moments ago, we saw shares in e-commerce and resale platform Poshmark start to trade here, opening at $97.50 a share after pricing shares in that IPO at $42 a share, 6.6 million shares in that IPO here. It's, of course, a very closely watched debut. As you can see here, shares up 140%. Reason being here is because we just got a firm yesterday, that another big IPO here-- that would make two, pretty much doubling in their debut.
Of course, last year we saw the most companies doubling in their debut since the tech bubble. And any time you start to get comparisons like that, people get a little nervous. So I want to bring on our next guest here in Phil Haslett. He's the co-founder at EquityZen, a marketplace for buying and selling of private company stock.
And Phil, good to have you back on here, man. I mean, obviously there's a lot of demand around a lot of these tech companies. Poshmark is rare in the fact that it's able to show profitability as well as rising revenue here. But what's your estimation of maybe the temperature check in the IPO space right now?
PHIL HASLETT: It's getting real hot here, Zack. It's getting real hot. I think somebody had spoke to me and said it feels a little frothy. I'm kind of interested, I'm looking at these facts, what do I think about it? And I really feel like the bubbles are starting to go over the side of the glass.
We're seeing companies double on their IPO. I mean, this is including the fact that, you know, at EquityZen where we see a lot of pre-IPO transactions happening, we're seeing prices that are almost, you know, in a firm's example, almost six times what we saw in the pre-IPO markets four months ago. With Poshmark, we're seeing things close to six or seven times the price that we saw just a few months ago, so there's a lot of exuberance. I think it's one of these things where, you know, the music stops at some point, you just don't want to be the last person off.
AKIKO FUJITA: Phil, is it just about exuberance, or is it also about sort of the bankers, the underwriters, and they're slowly getting the pricing right? And we've seen a number of these companies experiment with different formats-- whether it's a hybrid auction, we've seen a lot of direct listings and SPACs as well. What do you, what do you attribute this doubling of the price that we've seen from Poshmark, almost with a firm, and the other names that we saw back in December?
PHIL HASLETT: Yeah, it's a great question. You know, I would have expected that a combination of new things coming out, right, direct listings along with issuances, which is something that I think you'll see roadblocks, too, where they raise private money, like a $20 or $30 billion valuation. What you saw with Unity Technologies, where Unity basically kind of ran their own IPO process with the underwriters to make sure that they would maximize price. Despite that process that Unity ran, they still had a pretty marked increase in their market cap and their price on IPO day.
So what I think is actually happening here is really just a constrained amount of supply available to a lot of retail investors that are interested, right? If you take Poshmark as an example, it's a, call it $3, $4 billion company at its IPO price. Let's say they issued a couple hundred million worth of stock. That's about 10% of the shares outstanding that are now in the market. But of that 300 million, you know, probably about $250 million of that stock is actually going into the hands of long-term holders, institutional investors that are there for the long-term.
So now you got $50 million worth of stock that's trading amongst retail investors that are interested in buying it, and that reflects the valuation of a $3 or $4 billion company. It's just kind of a recipe for frothiness, or maybe beyond that. And so I think that's playing a role here, too.
ZACK GUZMAN: No, but that's, that's why it's interesting to hear you talk about the lead up there in share prices on the private market before we get to day one of public trading, because it'd be more than just issues of figuring out price there in the public market because you already said you're seeing these share run ups in the private market ahead of these listings. So it seems like it is pure enthusiasm around some of these names, and focusing in on maybe some of these, these players here, and I wonder how much of that might diminish over time. Obviously, as you mentioned, SPACs were a big theme in 2020 as well. But if it gets easier to start turning some of these private companies into public ones, what does that maybe do to the bubble that we're seeing potentially play out here in 2021?
PHIL HASLETT: Yeah, it's another kind of supply/demand question, right? If more and more companies come to the market and they match up with these SPACs that have a lot of cash to deploy, and they go into the market with direct listings, you should see some bouncing out and some tapering of kind of where prices shake out.
I think we at EquityZen are excited to see that there's a lot of companies that are tapping the public markets. We expect to see more in 2020-21, because you have so much dry powder sitting within these SPACs, right? I think if you were following the story about Plaid-- Plaid terminated its, its merger I think yesterday or the day before, and I'm sure that they're immediately fielding calls from SPACs that are interested in actually taking their company public.
So I think that you're going to continue to see kind of offsetting things, right? A lot of companies coming public at the same time means that there should be kind of a tapering and tempering of expectations on price. But at the same time, there's just so much capital so ready to deploy, and in a low interest rate environment, which we've seen for the better part of, I don't know, a decade now. I don't really see this stopping. But as you know with market cycles, they're cycles for a reason. They always come to an end, and then there's a rebirth, and it's just a matter of when that's going to happen.
AKIKO FUJITA: Phil, it's interesting what you noted earlier about just the retail play, because certainly over the last year we have so many-- we've seen so many retail investors come online. Does that exuberance extend to some of these names that aren't necessarily household names? If you look at, for example, Poshmark, that's a name that a lot of people are familiar with. Petco also coming online today, also a familiar name. You've also got in the 2021 pipeline, somebody like an Oatly, like a Bumble, that retail investors who maybe are not necessarily into the weeds on the numbers can get behind because they know that brand.
PHIL HASLETT: I think it extends past just consumer-facing companies, right? If you take a company like Palantir which went public pretty recently, that's a company that does enterprise software-- not exactly the most glamorous of things. Not something that people have on their, on their smartphones that they're using on a day-to-day basis. And even that company has had a run up post their direct listing from $10 all the way up to $25 in a short period of time.
So I think it's kind of across the board. If you were to ask bankers, probably years ago they would say that the retail flows are not significant enough to really move prices. I think we're having to face kind of a new reality now, that with the increase in people that have brokerage accounts that are active, that are buying stock options on these things, they are actually having a pretty market effect on how, how prices are going to move over time-- in names that they're familiar with, that we're all familiar with, and also in less familiar names in cybersecurity, in SaaS companies and the like.
AKIKO FUJITA: Phil Haslett, EquityZen co-founder. Always good to talk to you on this issue. Thanks so much for joining us today.
PHIL HASLETT: Thanks for having me.