Why Naver Is Buying Poshmark (POSH) Is For $1.2 Billion

By Amit Chowdhry ● Oct 4, 2022
  • Naver is buying Poshmark (POSH) for $1.2 billion. These are the details.

Naver Corp and Poshmark, Inc. (NASDAQ: POSH) announced that they have entered into a definitive agreement under which Naver will acquire all of the issued and outstanding shares of Poshmark for $17.90 in cash, representing an enterprise value of approximately $1.2 billion. And this represents a premium of 15% to Poshmark’s closing stock price as of October 3, 2022, a 34% premium to the 30-day volume weighted average price, and a 48% premium to the 90-day volume weighted average price of Poshmark’s shares.

Naver is known as the home to the largest number of bloggers in Korea and the largest number of digital creators of stories (Wattpad) and comics (Webtoons) globally. And Poshmark is a leader in creating unique styles and fashion trends, including the growing K-Fashion apparel segment.

In addition, this transaction provides Naver with an enhanced foothold in the U.S., expanding its international profile, which it has steadily increased both organically and through investments over the past 20 years. Naver will build on its existing U.S. footprint, including Webtoon Entertainment, which is based in Los Angeles and extremely popular with younger audiences, and its $600 million acquisition of Wattpad in 2021. Naver has benefited from the recent global digital disruption and transformation of media and publishing through Wattpad and Webtoon Entertainment, and looks to extend its growth in the region with the addition of Poshmark.

This deal will create a global player in online fashion re-commerce by combining Poshmark’s unique discovery-based social shopping platform and deeply engaged community with Naver’s technological prowess in upleveling the e-commerce experience. And Poshmark will also leverage Naver’s proven expertise and track record in Asia and its significant expertise in backing and investing in other fashion and consumer-to-consumer (C2C) e-commerce platforms globally.

The combination accelerates Naver’s strategy to build a global e-commerce community portfolio to capture growth in large markets around the world, including Poshmark’s home market of North America. And together the companies expect 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.

The combination will also enable Naver to capitalize on the increasing consumer shift in fashion to online re-commerce, which is an $80 billion market today in the U.S. alone and is expected to grow by 20% annually to $130 billion by 2025.

Poshmark currently has a community of more than 80 million registered users, across 90% of zip codes in the U.S. And in 2021, the company generated approximately $2 billion in gross merchandise value (GMV) with a take rate of 20% and gross margin of 85%. The primary demographic of millennials and Generation Z users is the largest shopping demographic for secondhand goods and a key driver of the circular economy and community-based platforms. One of Poshmark’s strong appeals to the growing number of conscious consumption shoppers is the important role it plays in extending the lifecycle of millions of previously made items and reducing fashion’s footprint. These users will expand and complement Naver’s current user base.

The transaction is expected to generate significant revenue and cost synergies, consisting primarily of:

– Re-acceleration of annual revenue growth beyond 20% in the near term by leveraging Naver’s advertising capabilities to drive further monetization, accelerating investment to drive growth overseas, and expanding live commerce adoption.

– Approximately $30 million in run-rate annual cost savings within 24 months post-closing including through rationalization of public company costs and driving of higher operating leverage across operating and other cost functions.

Upon completion of the transaction, Poshmark will become a standalone U.S. subsidiary of Naver and will continue to be led by CEO Manish Chandra and Poshmark’s current management team. And Poshmark will continue to operate under its existing brand, as well as maintain its employee base, Poshmark community, and headquarters in Redwood City, California.

KEY QUOTES:

“The combination will create the strongest platform for powering communities and re-fashioning commerce. Poshmark is the definitive brand for fashion in the United States that provides a social network for buying and selling apparel. Naver’s leading technology in search, AI recommendation and e-commerce tools will help power the next phase of Poshmark’s global growth.”

“Poshmark is a natural fit for our business – our two companies share a common set of values and vision around content, community and empowerment. Bringing Naver and Poshmark together will immediately put us at the forefront of creating a new, socially responsible, and sustainable shopping experience designed around sellers of all sizes and interests – from individual and influencer sellers to professional sellers, brands and specialty boutiques – and a large, loyal, and highly engaged social community. We are excited to work closely with Manish and his talented team to create lasting value for all our stakeholders.”

– Choi Soo-Yeon, Chief Executive Officer of Naver

“The opportunity to join forces with Naver – one of the world’s leading and most innovative and successful internet companies – is a testament to the strength of our brand, operating model, and what we’ve built over the last decade with our talented team and amazing community. Our industry continues to evolve at a rapid pace, and we are excited to continue to lead the future of shopping by providing our community with an unparalleled experience that is simple, social, fun and sustainable.”

“This is a highly compelling opportunity for our employees, who will benefit from being part of a larger, global organization with shared values and complementary strengths. This transaction also delivers significant and immediate value to our shareholders. Longer term, as part of Naver, we will benefit from their financial resources, significant technology capabilities, and leading presence across Asia to expand our platform, elevate our product and user experiences, and enter new and large markets. I look forward to partnering with Naver as we take our company into its next phase of growth.”

– Manish Chandra, Founder and Chief Executive Officer of Poshmark