April 1, 2015
How many times have you been to your favorite local business to pick up that delicious artisan bread, cheese, or wine? Or how about the number of times you've taken your car to the guy who has been servicing your Ford for 20 years who you trust implicitly or maybe the great family owned dry cleaners/tailor who knows you by name? These are likely locally owned-privately held businesses that do not sell their stock to the public. For example, one of the most famous privately held companies headquartered in Rochester is Wegmans.
However, there are some privately held companies that become large enough and want to grow even bigger so they go through the process of becoming public by offering shares of their company to be purchased. This is called an initial public offering or IPO.
This is relevant because when companies go public you have the opportunity to become a share-holder in that company. For people to invest, often times they need to identify with and believe in the company, their mission, and their products. This week, one of the largest online stores has announced their IPO: ETSY.
According to this article ETSY, the storefront for hand-made crafts and goods, has 54 million members, 1.4 million active sellers, and 19.8 million active buyers worldwide. The IPO will offer 16.6 million shares between $14-$16/share. Yet, there is much to know about a company before you decide to invest in it, whether it is a newly public company or one that has been public for 100 years.
- Understand the mission: First, keep sellers happy as they generate profits. Second, create a successful and professional space for crafts as a business. And third, ETSY is the largest public company certified as a B corporation. This means that they have strict environmental, social, accountability, and transparency standards.
- Know their financials: While sales were up 54% in 2014 ETSY is still not profitable and posted a net loss of $15.2 million. The largest profit driver is through fees that sellers pay for transactions, listing items, and promotions.
- User Experience: To the best of your ability try out the site and see what it is like to be a member of ETSY. If you can use it and are satisfied you should be able to feel good about investing in it.
I have found that people who can identify with the companies they own, enjoy owning them more, are more confident in their reasoning for owning them, and can stick with them during bumpy times in the market. If ETSY is not for you there are many other companies out there. Talk with your advisor, think about the products or services you like and use daily, and create a plan!
Caroline Hill, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).