Black-and-White Capital, a hedge fund, is urging Etsy to consider a sale on the basis that the growth of revenues in the United States has slowed at a time when expenses were on the rise. Currently, the hedge fund owns approximately 2% of the online marketplace for handmade gods.
According to Black-and-White Capital, the intrinsic value of Etsy could rise to $30 a share if operational improvements were done while it could also fetch $15.50 a share in the event of an immediate sale. In the opinion of Black-and-White Capital, a flawed search algorithm was the reason behind the slowdown in the gross merchandise sales of Etsy.
Among the suggestions that have been made to turn things around include fixing the search functionality and introducing ‘similar items’ feature in order to drive sales. Additionally, marketing expenses should be redirected to ensure an increase in the number of repeat customers. Also, Etsy should take advantage of the public cloud and move its information technology infrastructure there and enjoy the cost-saving benefits that come with outsourcing.
Black-and-White Capital has also accused the handcrafts retailer of engaging in ill-advised spending. As a B corporation that is certified, Etsy is required to adhere to standards such as benefiting not just its shareholders but also its suppliers, consumers, employees, the environment and the community. This has resulted in a situation where Etsy pays its employees salaries that are more than 40% above the living wage. Etsy has maintained that its B Corporation status has been key to its success.
Other proposals from the hedge fund included having the position of chief executive and chairman separated. Currently, Chad Dickerson occupies the dual role though he has announced that is stepping down from the position. Dickerson will be replaced by Josh Silverman who has been serving as a member on the board of Etsy.
This comes in the wake of other departures and layoffs that have been announced at the company. Among those leaving includes the firm’s CTO, John Allspaw, as the handcrafts retailer considers laying off about 8% of its employees.
Shares of Etsy have declined by over 30% since the public listing which took place around 24 months ago. At the time of the IPO, the handcrafts retailer managed to raise $307 million. On the day it debuted the market, the share appreciated by 88%. Since then, Etsy has made a couple of acquisitions even as it faced fierce competition from the likes of eBay and Amazon.