The new year is off to a busy IPO start. As The Exchange reported a few weeks ago, investors anticipate a busy Q1 IPO cycle, followed by a slower Q2 and a busy Q3 and Q4.
With Affirm releasing an initial IPO price range last night and Poshmark repeating the feat this morning, private-market investor expectations are holding up thus far.
Secondhand fashion marketplace Poshmark anticipates its IPO could price between $35 and $39 per share. Using its simple share count, the former startup could be worth nearly $3 billion. So, we’ve seen two multiunicorns set early pricing terms this week. That’s comfortably busy.
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As we did with Affirm, we’ll dig into Poshmark’s new pricing interval, calculate valuations for the company using both simple and fully diluted share counts, and figure out how they compare to its most-recent financial results and final private valuation. For the last bit, we’ll pull from PitchBook data and the S-1/A filing itself.
But for those of you in a hurry, the short gist is that for Mayfield, GGV, Menlo Ventures, Inventus Capital and Temasek, the company’s first pricing estimate looks like a win.
If you want to read our first dig into the company’s IPO filing that is more focused on performance than pricing, head here. Let’s go!
Poshmark’s hugely “up” IPO
Poshmark’s $35 to $39 per-share IPO price interval could change, but even if it fails to rise, the company’s implied valuation is a dramatic step up from prior rounds.
For example, the company’s S-1 filings note that during its 2017 venture round — the last that it raised per the IPO filing and PitchBook data — Poshmark sold shares at $8.37 per share. That’s a fraction of the price that the company now expects public-market investors to pay.
As with Affirm, let’s calculate Poshmark’s valuation using both simple and fully diluted share counts. The latter takes into account shares that have been earned, but not yet exercised or converted.
Here’s the company’s valuation range using a simple share count, inclusive of its underwriters’ option to purchase 990,000 shares at its IPO price:
- Poshmark valuation, low-end of range: $2.6 billion.
- Poshmark valuation, high-end of range: $2.9 billion.
If we expand the company’s share count to include vested options and RSUs, the numbers go up. Again, the following math is inclusive of the underwriters’ option:1
- Poshmark valuation, low-end of range: $2.95 billion billion.
- Poshmark valuation, high-end of range: $3.29 billion.
So, are those good numbers? Yes.
Poshmark’s 2017 Series D valued the company at $625 million on a post-money basis. So, every possible valuation at the company’s current valuation provides a good multiple to that final price. For investors like Mayfield and Inventus (involved since the company’s Series A) and Menlo Ventures (which led the company’s Series B) it’s going to be a great payday.
Affirm, recall, is also enjoying a firm updraft in its own valuation thanks to the same IPO market. The public market exit window is not only still open, it’s wide open.
Multiples
So what about the company’s valuation range compared to its revenues? In the September quarter of 2020, Poshmark counted top line of $68.8 million, its largest-ever three-month result. And the company managed to turn a $10.8 million net profit off that sum in its second and consecutive profitable quarter.
But we’d like a more current number to use, so let’s use a historical analog to calculate how large Poshmark might have become in the most recent calendar quarter.
From Q3 2019 to Q4 2019, Poshmark grew about 9.5%. Applying that same growth rate to the company’s 2020 results, Poshmark would have wrapped the fourth quarter with around $75.3 million in top line. That result would give Poshmark a revenue run rate — on an annualized basis — of around $301.3 million.
Loosely, then: At the low end of its valuation range, Poshmark is worth 8.6x its current run rate, and at the top end a richer 10.9x. Those are lower figures than what we saw with Affirm, and they are lower than what modern software companies can command. But they are still rich multiples, in historical terms.
It would not be a huge shock if Poshmark managed to do a little better by the time it starts to trade. But even inside of its first-draft IPO pricing, the company’s debut is set to be a huge fundraising result for the company, and a material win for its investors and employees alike.
- For this calculation, we included “stock issuable upon the exercise of options to purchase shares,” “shares of our common stock subject to RSUs outstanding as of September 30, 2020,” and all the shares that Comerica Ventures may exercise as, given their low per-share costs, it would be silly not to.