Shares of online thrift store Poshmark soared 142% on its first day of trading on Thursday, pushing its valuation above $7 billion.
The San Francisco-based company’s stock ended the day at $101.50. It had priced its shares at $42 each on Wednesday evening, up from a previous range of $35 and $39. That gave the company a valuation of $3.5 billion on a fully diluted basis, almost triple the $1.25 billion it was valued at in 2019 when some of the company’s existing investors sold shares in a secondary transaction, according to the Wall Street Journal. Cofounder and CEO Manish Chandra’s 9% stake in the company was worth over $600 million.
Started in 2011, Poshmark runs an online marketplace for secondhand goods. Like eBay, it doesn’t touch inventory and lets buyers and sellers transact directly with each other, which has allowed it to keep costs down and scale quickly. It has attracted a large, engaged following, with 32 million active users who spent an average of 27 minutes a day on the shopping app in 2019, according to the offering prospectus. Users are encouraged to follow each other’s virtual closets and like listings.
“Poshmark is at the intersection of three of the biggest things happening in retail: the shift to online, the shift to social and the shift to secondhand,” says Venky Ganesan, a partner at Menlo Ventures, which first invested in the company in 2012. It is now the second-largest shareholder with a 14% stake.
The company generated revenue of $193 million in the nine months ended September 30, up 28% from the previous year. It makes money by taking a cut on transactions, charging a 20% fee on sales $15 or more or a flat $2.95 for smaller sales. It turned its first profit in the quarter that ended June 30.
“In 2020, we saw a pretty big stress test of our social marketplace,” said Chandra in an interview on Thursday afternoon. “As the demand shifted from buying work clothes and dress clothes to sweats and tie-dye, the marketplace quickly shifted in that direction.”
Poshmark has a history of spending heavily on marketing, with the cost of television commercials and social media ads totaling $221 million during 2018 and 2019, about two-thirds of its revenue in the period. It has dialed back this spending during the pandemic, but warned investors that it plans to ramp it up again in the future in order to attract and retain users.
The company, which listed its shares on the Nasdaq under the ticker symbol “POSH,” raised more than $277 million in the offering.