Activist investors flock to Etsy.
Elliott Management, the investment management firm known for its aggressive governance tactics, has built a roughly 13% position in Etsy stock, CNBC References — a combination of stocks and options. It makes Elliott Etsy’s largest investor after Vanguard, which has an 11% stake, and asset management giant BlackRock (5%).
And — as of today — Elliott has representation on Etsy’s board of directors. The company announced this morning that Elliot partner Marc Steinberg will join its 10-person board effective 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 have become a significant investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation. I look forward to working with the board and supporting Josh and the team as they execute initiatives to improve the customer experience, accelerate top and bottom line growth and long-term value.”
Elliott, which had about $59 billion in assets as of June 2023, operates like most activist investors: taking a significant stake in a company it sees as undervalued and putting pressure on management to meet its demands.
Early in its history, Elliott restructured companies including Enron, TWA and WorldCom. But in recent decades, the company has turned its attention to the lucrative technology sector.
In 2020, Elliot acquired $2 billion in Twitter stock and appointed three directors to the company’s board, attempting to replace then-CEO Jack Dorsey. Elliott has been involved in an effort to “turn around” Pinterest. And he encouraged Salesforce, in which he has a multibillion-dollar investment, to implement tough new policies for engineers and salespeople aimed at reducing the number of employees.
Etsy, to be fair, hasn’t had the best of luck lately, ending last year with massive layoffs.
The retailer finds itself fighting a battle on multiple fronts, trying to fend off competition from Chinese discounters Temu and Shein while keeping poorly made products and scam artists out of its market. In a recent earnings call, Etsy CEO Josh Silverman admitted that Temu and Shein — who have pumped in billions in advertising for their services — have boosted Etsy’s marketing spend. In the meantime, stores report that AI-generated junk is flooding Etsy, degrading the browsing experience on the platform.
Still known as a marketplace for artisanal and handmade items from small businesses, Etsy has also struggled to regain its footing after a pandemic-era sales and revenue boost proved fleeting. Trying to develop new business areas, Etsy has made several acquisitions in recent years, grabbing resale platform Depop. Market based in Brazil Elo7? and Reverb, a marketplace for new and used instruments. However, the M&A strategy has had mixed results, with Etsy offloading Elo7 just two years after acquiring the company for $217 million.
In its most recent earnings call, Etsy he said Investors expect its gross merchandise sales to fall between 1% and 2% and revenue to rise 2% to 3%. Perhaps it’s no surprise, then, that Elliot’s promise of steep cost-cutting sent Etsy stock up 10% this morning.
