Etsy shares plunge on earnings report
NEW YORK— Etsy got its first taste of the fickleness of the stock market after a disappointing maiden earnings report sent shares falling as much as 23 per cent.
The online marketplace for handcrafted goods saw more than $530 million (U.S.) in market value wiped out as the shares declined to as low as $16.21 at 9:33 a.m. in New York. That is just 21 cents above its $16 initial public offering price a month ago. The strong U.S. dollar ate into revenue because the vast majority of gross merchandise sales are listed in the currency — even if the seller is located abroad, Etsy said Tuesday after the market closed.
After a drop off in U.S. IPO activity, Etsy’s 88-per-cent gain in its first trading day on April April 16 was viewed as a jolt to the market. But the shares peaked at $30 that first day. 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.
Etsy, based in Brooklyn, N.Y., reported that its first-quarter net loss widened to $36.6 million, or 84 cents a share, from a loss of $463,000 a year earlier. Revenue of $58.5 million compared with the $58 million average of analysts’ estimates compiled by Bloomberg.
The strength of the U.S. 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 U.S. dollar climbed about12 per cent against the euro in the first three months of the year.
To combat that drag on growth, 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.