Etsy IPO: Everything You Need to Know
Business + Economy

Etsy IPO: Everything You Need to Know

What is Etsy? Founded in 2005, Brooklyn-based Etsy is an online marketplace where people from around the world can buy and sell handmade and vintage goods. It now has nearly 700 employees. 

What does Etsy stand for? It’s a secret only known to its founders and the company makes a point of throwing wild made-up suggestions at the wonderers. It could be the acronym for Easy to Sell Yourself or the name of a man who made delicious gelato when co-founder Rob was backpacking through Italy, as the company has suggested (lightheartedly) over the years. As you can easily tell, Etsy employees like to have fun. 

What can I buy on Etsy? You can get anything from jewelry and clothing (lots of message t-shirts) to maps and decorative objects, either new or vintage. Here are five of the oddest items we’ve found on the site this week: 

How does Etsy make money? Revenue comes from listing fees ($0.20 for each item) and a 3.5 percent fee for sales completed on the site. Some additional revenue also comes from seller services such as advertising, payment processing and discounted shipping labels. 

The company had gross merchandise sales of $1.93 billion in 2014 and brought $196 million in revenue that year, up from $125 million in 2013, but it has yet to turn profitable. Operating expenses have also gone up and the company posted a $15 million loss last year, down from an $800,000 loss in 2013. And operating expenses are expected to rise as Etsy hires new people and improves technology. 

When is the IPO happening? The company priced its IPO on Wednesday and began trading on the Nasdaq Thursday morning under the ticker symbol ETSY. 

How much will Etsy shares sell for? The IPO priced at $16 a share, the high end of its expected range, meaning Etsy raised $266.66 million. As of midday Thursday, the stock price had traded as high as $35.74 before dropping back closer to $32.

How much is Etsy worth? Based on the IPO price, Etsy had a market valuation of $1.78 billion, according to Bloomberg. With the stock price having doubled to $32, Etsy's market cap is approaching $3.6 billion.

Why is the IPO such a big deal? Etsy differs from other IPOs in many ways, but it especially stands out for its socially responsible business practices and its focus on small investors. The company is registered as a B corporation, which represents a certification that it meets rigorous standards of social and environmental performance, accountability and transparency. 

It plans to donate $300,000 of the proceeds from the IPO to, a non-profit for educating women and under-represented groups on how to build businesses. The company has also made a point of setting aside 5 percent of the planned public offering for its vendors. 

Should I buy shares? Gross merchandise sales have increased roughly 16 percent every quarter since 2008 and many experts agree that Etsy has the potential to grow even further. But it remains to be seen whether the brand is strong enough to attract high demand from investors the way Alibaba has done and turn a profit while keeping its emphasis on social good and its sellers happy. Etsy warned it its IPO filing that it “may not achieve or maintain profitability in the future." So if you are going to buy in, know what you’re getting. 

This article was updated to reflect Etsy's IPO pricing and initial trading.

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