Etsy is attracting activist investors
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Etsy is facing a wave of activist investors.
Elliott Management, the investment management firm known for its aggressive governance tactics, has built a roughly 13% position in Etsy’s stock, CNBC Reports — a mix of shares and options. It makes Elliott Etsy’s largest investor after Vanguard, which has an 11% share, and the asset management giant BlackRock (5%).
And — as of today — Elliott has representation on Etsy’s board of directors. The company announced today that Marc Steinberg, a partner of Elliot, will join its 10-person board on February 5.
“Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community,” Steinberg said in a press release. “We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation. I’ve looking forward to working with the Board and supporting Josh and the team as they execute on initiatives to improve the customer experience, accelerate top- and bottom-line growth, and drive long-term value.”
Elliott, which had assets worth $59 billion by June 2023, operates in the same way as most activist investors. They buy a significant stake in what they perceive to be a undervalued company, and then exert pressure on management to comply with their demands.
Early in the firm’s history, Elliot was involved in restructuring firms such as Enron TWA and WorldCom. But over the past few decades, the firm’s turned its attention to the lucrative tech sector.
In 2020, Elliot acquired $2 billion in Twitter shares and nominated three directors to the company’s board, attempting to replace then-CEO Jack Dorsey. Elliot’s engaged in a “turnaround” effort at Pinterest. And it EncouragementSalesforce, where it has made a multi-billion dollar investment, is implementing harsh new policies aimed at reducing the number of engineers and salespeople.
Etsy, to be fair, hasn’t had the strongest go of it lately, ending last year with Mass layoffs.
The retailer is fighting on several fronts. It’s trying to keep scammers and poorly-made goods off its market, while also trying to compete with low-cost Chinese retailers Temu. On a recent earnings call, Etsy CEO Josh Silverman admitted that Temu and Shein — which have pumped billions into ads for their services — were driving up Etsy’s marketing expenditures. Meanwhile, Report that AI-generated junk has flooded Etsy, causing the search experience to be worse on the platform.
Etsy, which is still known for its artisanal and handmade products from small businesses and artisans, has struggled to regain footing since the pandemic-era surge in sales and revenue failed to last. Etsy’s recent acquisitions have been aimed at expanding its business. Depop; Brazil-based marketplace Elo7Reverb is a marketplace that sells new and used instruments. But the M&A strategy has had mixed results, with Etsy offloading Elo7 only two years after acquiring the company for $217 million.
Etsy’s most recent earnings call was held on September 30, 2018. Tell them to get on with itInvestors should expect its gross merchandise to decline between 1 and 2 percent and revenue to increase by a paltry 2% to 3%. Perhaps it’s no surprise, then, that the promise of steep cost-cutting from Elliot drove Etsy’s stock up 10% this morning.