Fiverr IPO launches at $21, and share price nearly doubles

procurement

Fiverr (NYSE: FVRR), the online marketplace for digital creative services, priced its 5.3 million IPO Wednesday night at $21 per share, raising about $111 million in new funding. On Thursday morning, shares began trading at $26, but when the market closed in the afternoon, Fiverr’s share price had risen to $39.96 (nearly doubling). Based on the closing price per share and an estimated 31 million shares outstanding, Fiverr’s market cap would be about $1.2 billion, or 16 times revenue.

In 2018, Fiverr posted $293.5 million in gross merchandise value (total receipts), up 38% from 2017. In 2018, revenue of $75.6 million was also up 38%. The company registered a net loss and adjusted EBITDA the same year of ($36.1) million and ($21.0) million. A major contributor to these losses, Fiverr’s sales and marketing expense in 2018 was $49.7 million, or about 66% of revenue. That said, some investors in platform businesses (who are looking at the long game) seem to value high growth over profitability --  at least, until their patience runs out.

It bears mentioning that Freelancer.com  (ASX: FLN) in 2013 and Upwork (NASDAQ: UPWK -- the two online freelancer marketplace businesses that went public before Fiverr -- also had share price surges at the time of their IPOs.  But within less than a year, their share prices returned to their IPO price levels.

For all the gig economy sizzle, the market for online freelancer work/services is still young — which means there is great uncertainty and, on the flip-side, technology-based innovation (leading to many different approaches to supporting economic exchange between businesses and online freelancers). Fiverr goes to market with a unique approach, which it calls services-as-a-product (SaaP) within which businesses effectively shop online for a standardized service deliverables with comparable, no-haggle prices.

The SaaP model, reminiscent of an e-procurement e-catalog, may resonate with and attract the attention of procurement practitioners. Fiverr, which often draws an analogy between its services (which it has trademarked as Gigs) and products with SKUs, also argues that the buying process is fast and low-friction.

We will provide further analytic post-IPO coverage soon. In the meantime, check out our recent PRO series: Fiverr, the Online Services Marketplace, Is Going Public: What You Need to Know — Part 1 and Part 2.

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