Etsy's first earnings gives a taste of public market u-turns

Etsy Inc, an online marketplace for hand- crafted goods, got its first taste of the fickleness of the stock market Tuesday after its maiden earnings report sent shares falling as much as 20 per cent in extended trading. 

PHOTO: AFP

MAY 20, 20157:51 AM

[NEW YORK] Etsy Inc, an online marketplace for hand- crafted goods, got its first taste of the fickleness of the stock market Tuesday after its maiden earnings report sent shares falling as much as 20 per cent in extended trading.

The decline wiped out about US$460 million in market value and dragged the shares to just 86 cents more than April's US$16 initial public offering price. Etsy said the strong US dollar is hurting revenue because the vast majority of gross merchandise sales are listed in the currency - even if the seller is located abroad.

After a drop off in US IPO activity, Etsy's 88 percent gain in its first trading day was viewed as a jolt to the market. Now, closely held companies considering whether to go public, which would require them to report earnings every quarter, may see Etsy as an example of how quickly public investor sentiment can about-face.

Brooklyn, New York-based Etsy on Tuesday reported first- quarter revenue of US$58.5 million, compared with the average analysts' estimate of US$58 million, according to data compiled by Bloomberg.

The strength of the US currency hurt international demand for its wares sold in dollars, which make up 92 per cent of merchandise sales, Chief Financial Officer Kristina Salen said on a conference call with analysts. The US dollar climbed about 12 per cent against the euro in the first three months of the year.

"If foreign exchange rates continue at current levels, it will likely continue to impact buyer behavior outside of the US," Etsy said in a statement.

To combat that drag on growth, Ms Salen said the e-commerce company will encourage sellers to list in their local currency.

Additionally, Etsy said it plans to increase the pace of hiring and marketing. The company is also facing fraud claims from investors who alleged millions of items sold on the website probably violated trademarks.

Etsy dropped as low as US$16.86 in extended trading after closing at US$21 in New York. The shares have climbed 31 per cent since they began trading April 16.

BLOOMBERG