By Bill Peters
'We don't think they'll get a better deal than this,' Wedbush says
Shares of secondhand-fashion marketplace Poshmark Inc. rallied Tuesday after the company agreed to be acquired by South Korean search and e-commerce platform Naver Corp. for $1.2 billion a day earlier. Analysts say rival suitors for Poshmark (POSH) are unlikely due to the company's sluggish sales and struggles with its peers.
The deal comes after investors have weathered a steep decline for Poshmark stock and its overall value since the company went public in January 2021. More recently, rising prices for essentials have hit e-commerce and demand for clothing.
And while Poshmark shares were up 13.4% to around $17.65 on Tuesday, analysts suggested investors were unlikely to squeeze more value out of the deal.
"We don't think they'll get a better deal than this," Wedbush analyst Tom Nikic said of Poshmark in a research note on Tuesday. "Though the proposed takeout price is well below the IPO price ($42) and the 52-week high ($27.34), we doubt that shareholders will be able to push for a higher share price."
He also noted that insider shareholders, who control 77% of the voting rights, have already approved the deal. And he said the company has "struggled mightily" since early last year, with quarterly results missing expectations and slowing sales growth.
Nikic downgraded Poshmark to neutral from the equivalent of a buy rating. He raised his price target on the stock to $17.50 from $14. Nine of the 11 analysts tracked by FactSet have a hold rating on the stock.
The $1.2 billion offered by Naver is well down from the $7.5 billion valuation Poshmark had at the time of its IPO in January 2021. Shares traded above $100 during the company's debut, and through last year were still more expensive than Naver's $17.90 per-share cash offer.
Poshmark and Naver, in a release on Monday, said the deal would help Poshmark expand abroad and equip it with better technology to target potential shoppers. The deal also marks the latest acquisition in the online fashion universe, after Etsy Inc.'s (ETSY)acquisition last year of Depop, a marketplace based in London.
But the purchase also follows difficulties elsewhere. Rent the Runway Inc. recently announced job cuts, as demand wavered and as remote-work trends persisted. Stitch Fix Inc. also recently announced staff reductions.
Other analysts cast doubt on a better price for Poshmark. William Blair analysts said potential bidders looking to gobble up a competitor might have already satisfied their appetites.
"We do not think that there is a high likelihood of competing bids given that Etsy (a potential acquirer) acquired Poshmark's competitor Depop in 2021 for $1.6 billion at about one-fifth the revenue scale of Poshmark," they said in a note on Tuesday.
MKM Partners, in a note on Monday, said they couldn't rule out a competing bid for Poshmark. But they, too, said they "view it as far less likely at this point."
Tuesday's move higher left Poshmark stock up around 4% year-to-date, but down 82% from its IPO heights in 2021. The S&P 500 Index is down 21% year-to-date.
(END) Dow Jones Newswires
October 05, 2022 08:18 ET (12:18 GMT)
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