Fashion consumer-to-consumer marketplace Poshmark Inc. (NASDAQ:POSH) has agreed to be bought by South Korean e-commerce and internet giant Naver Corp. in a $1.2 billion deal. Naver will pay $17.90 in cash for each outstanding share of Poshmark stock. The deal price represents a 15% premium to POSH’s closing stock price on October 3. Along with approximately $580 million in cash on Poshmark’s balance sheet, the transaction is valued at $1.6 billion.
Following the news, POSH stock surged 14.3% in extended trading on Monday and is trading up nearly 11.6% in Tuesday’s pre-market session currently. Meanwhile, Naver, which is listed on the Korean stock exchange, fell 8.8% as investors fret over the decision. Factors such as the uncertain macro backdrop, the dimming sheen of online marketplaces, and the depreciating value of the Won compared to the U.S. Dollar are puzzling investors.
Details of the Deal
The companies expect the deal to be completed in the first quarter of 2023. The combined entity is anticipated to earn $30 million in run-rate annual savings within two years of completion and re-accelerate annual growth beyond 20% in the near term.
Notably, the U.S. online re-commerce market is currently valued at $80 billion and is expected to reach $130 billion by 2025, as per stats from Activate Consulting. Poshmark hosts about 80 million registered users and Naver has about 36 million users that access its search portal. A combination of these two powerful user bases will propel Naver’s online community reach across the globe.
Through the acquisition, the companies aim to “increase purchase conversion rates, deepen user engagement, create an industry leader in livestreaming commerce, and enhance the unique relationship- and discovery-based experiences that are driving fast-growing re-commerce verticals.”
Analyst’s Reaction to the Deal
Following the news, JMP Securities analyst Nicholas Jones reiterated a Hold rating on the stock and considers the shares fairly valued at current levels.
Jones stated that the acquisition was not surprising as Poshmark was deemed a good fit for acquisition since it was trading materially below its IPO price of $42. Following the pandemic-triggered boost in online shopping, e-commerce sites have experienced a slump in sales owing to macro headwinds. Hence, being combined with a larger Asian company will provide Poshmark with possible growth potential in international markets.
