SEOUL South Korean e-commerce company Naver Corp announced a $1.2 billion purchase of U.S. fashion resale platform Poshmark Inc., but investors questioned the timing of its biggest acquisition and sent its shares tumbling.
Naver, which is also South Korea's top search engine, will pay $17.90 cash for each Poshmark share and acquire all of its outstanding stock in a foray into the U.S. e-commerce market.
Naver executives said in a conference call on Tuesday that Poshmark is the largest fashion consumer-to- consumer platform in North America, with 80 million registered users led by Millennial and Gen Z active users.
The deal will combine Poshmark's shopping platform with Naver's technology, likely starting with live-streaming, a key driver of e-commerce in South Korea, followed by technologies such as image recognition and artificial intelligence, the two companies said in a statement.
With Millennials and Gen Zers leaning toward value-driven consumption such as environmental protection and with inflation squeezing wallets, Naver and Poshmark hope to lead re-commerce or consumer-driven resale, a trend that Naver CEO Choi Soo-Yeon told Reuters.
The U.S. market for online fashion re-commerce is expected to grow by 20 per cent annually to $130 billion by the year 2025, according to Activate Consulting.
The enterprise value of Poshmark is about $1.2 billion. Naver's total investment is $1.6 billion, including consideration for Poshmark's cash, a Naver spokeswoman said.
The after-hours trading of Poshmark went up 14 per cent to $17.8.
As of 0335 GMT, Naver shares plunged by 7.5 per cent against a 2.3 per cent market rise.
The market is skeptical about whether this is the best timing. Since COVID 19 became endemic, many platform companies have lost their lustre. The plunging won't help, said Sung Jong-hwa, eBest Investment Securities analyst.
The won has fallen about 17 per cent against the U.S. dollar this year, to its lowest level since 2009.
In August, Poshmark reported a wider than expected quarterly loss, exacerbated by slower e-commerce growth, but efficient marketing spend and advertising revenue could help profitability, Naver said.
The online market changes so quickly, and not doing anything can mean long-term value, said Naver's Choi. We will do everything to carry out what we promised investors two years, five years from now. Naver acquired North American online literature platform Wattpad for $600 million last year.