Online crafts seller Etsy is going public in a deal that puts it under the microscope with both investors and its own community of buyers and sellers. Bobbi Rebell reports.
Etsy is approaching its initial public offering with a twist, offering shares to its community, setting aside five percent for them to buy in to the online homemade goods company for as little as $100 and as much as $2,500 just before it goes public. But the well-intentioned move has a rocky track record, warns Kathleen Smith who manages the IPO ETF Fund at Renaissance Capital. SOUNDBITE: KATHLEEN SMITH, PRINCIPAL, RENAISSANCE CAPITAL (ENGLISH) SAYING: "When Google tried to do this, it didn't work out so well that, you know, it's a good idea, conceptually. But the reality is that investors are different from shoppers and online merchants. So, it may be better to have investors who are looking at different things be the long-term holders of this stock." For example, on the surface, some numbers look good. Etsy had 1.4 million active sellers and 19.8 million active buyers as of December. And revenue rose by 57 percent last year. But Etsy has never made a profit, and its losses are growing. Given its essential relationship with its community, Etsy will have to walk a fine line between selling more, and selling out. SOUNDBITE: KATHLEEN SMITH, PRINCIPAL, RENAISSANCE CAPITAL (ENGLISH) SAYING: "The key issue is, can this company scale with this craft community and not kind of sell out to the type of business that Amazon does or eBay, where it's basically manufactured goods that are on the site, and that is where they will not distinguish themselves. Etsy will share the IPO spotlight with two other big names on Thursday, party goods retailer Party City and high speed trading firm Virtu Financial.