Shares of South Korean internet giant Naver Corp. logged their biggest drop in seven years after the company announced it had agreed to buy online second-hand fashion marketplace Poshmark Inc. in a deal worth about $1.2 billion.
(Bloomberg) — Shares of South Korean internet giant Naver Corp. logged their biggest drop in seven years after the company announced it had agreed to buy online second-hand fashion marketplace Poshmark Inc. in a deal worth about $1.2 billion.
Naver will buy all of Poshmark’s shares for $17.90 each, a 15% premium to Monday’s closing price of $15.57. Trading of Poshmark shares, which fell 0.6% on Monday, was halted on the news. After the deal is completed, Poshmark would become a standalone US subsidiary of Naver, and would continue to be led by Chief Executive Officer Manish Chandra and his management team, the companies said.
Naver shares sank 8.8% in Seoul Tuesday, hitting their lowest point since April 2020. Citi analysts had earlier downgraded the stock to a sell rating, saying its price-to-earnings ratio was hard to justify when compared to other internet firms.
“I think the market was surprised at the size of the deal,” Naver Chief Executive Officer Choi Soo-Yeon said in an interview, noting that this is the company’s biggest acquisition to date and first foray into Silicon Valley. “We will explain to investors about how we can maximize synergy through strengthening the combination of commerce businesses and communities.”
With the transaction, Poshmark, which has sought to expand internationally even as its stock steadily declined over the past year and a half, will get access to Naver’s extensive e-commerce experience. Naver obtains a US brand that has grown rapidly in recent years.
Naver is one of the leading internet players in South Korea, combining search and cloud services with online shopping. The Poshmark deal is aimed at creating a global player in online fashion, using the target’s social shopping technology.
“Poshmark will become a foothold in the North America market to expand our business in the region,” Choi said. “We will try out our technology through Poshmark’s services popular among the younger generation.”
Poshmark has a community of more than 80 million registered users, across 90% of zip codes in the US, the companies said.
The boards of both companies have approved the deal, which is expected to close by the first quarter of 2023, according to the statement.
Poshmark, which Chandra founded in 2011, is an online marketplace where users post photos of items they are selling and set their own prices, then ship goods once they are purchased. The company, which doesn’t hold any inventory, gets paid when users make a sale.
Share Drop
Poshmark’s closing price Monday is barely a third of that in its January 2021 initial public offering, in which it raised $319 million, including so-called greenshoe shares. The shares soared 142% from their $42 offer price in their first day of trading to $101.50, briefly giving the company a market value of more than $7 billion.
Other online resellers have experienced even sharper share drops since going public. Shares of RealReal Inc. are down 93% from its 2019 IPO, while ThredUp Inc., which went public two months after Poshmark, has fallen 87%.
LionTree Partners is working as Naver’s financial adviser, while Kirkland & Ellis is acting as Naver’s legal counsel. Goldman Sachs Group Inc. is serving as financial adviser to Poshmark, and Goodwin Procter is legal counsel.
(Updates with share reaction)
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