Affirm and Poshmark Hope to Keep IPO Boom Going in 2021

Last year saw some blockbuster IPOs, including Snowflake, Unity, DoorDash, and Airbnb, among others. The investor frenzy came despite the macroeconomic uncertainty brought on by the COVID-19 pandemic. Two other high-flying start-ups are also heading to the public markets, hoping to keep the IPO boom going in the new year: Affirm and Poshmark. Both companies updated their IPO filings this week and are eyeing ambitious valuations ahead of their public debuts.

Here's what prospective IPO investors need to know.

Image source: Poshmark.

Poshmark: The online thrift store

Poshmark operates a social e-commerce marketplace for clothes and other fashion products, connecting buyers and sellers while charging a 20% cut on the final sale if the sale is $15 or more. (The fee is a flat $2.95 for sales under that threshold.) Many have compared Poshmark to a digital thrift store, allowing customers to buy second-hand items online.

Here are the company's core metrics as of the third quarter:

Data source: SEC filings. TTM = trailing 12 months.

These metrics are all marching steadily higher. Gross merchandise volume (GMV) in the first three quarters of 2020 was $1.04 billion, compared to the $1.1 billion in GMV that Poshmark's platform had in all of 2019. The active buyer base has also more than doubled since the beginning of 2018. Engagement is strong and creates a virtuous cycle where buyers often become sellers and vice versa.

Poshmark was previously looking to go public in 2019 but delayed its IPO into 2020 before pushing the timeline back again to 2021. It seems that the patience may pay off. The offering is expected to price in the range of $35 to $39. Based on the 73.3 million shares that will be outstanding after the deal (before factoring in the greenshoe options), that would translate into a market cap of $2.7 billion at the midpoint. That's 4.5 times as much as the $600 million valuation that the start-up reportedly fetched in its most recent funding round, which happened in 2017.

Image source: Affirm.

Affirm: Straightforward financing 

Fintech specialist Affirm was founded by PayPal co-founder Max Levchin (who currently serves as CEO) and offers flexible financing options for larger purchases across many product categories. You've likely seen the company's logo next to an offer for 0% financing when shopping online. For loans that do bear interest, Affirm's pitch is that it charges simple interest instead of compound interest, an approach it considers to be more honest and transparent.

Affirm seeks to become ubiquitous, working to integrate directly with over 6,500 merchants to remove friction from the buying process and let consumers spread out paying for the purchase. The company also offers a consumer-oriented app where people can peruse all of the available products that can be financed on the platform.

Here are Affirm's key metrics as of the third quarter:

Data source: SEC filings.

The company is looking at a pricing range of $33 to $38, valuing Affirm at $8.6 billion at the midpoint based on 242.7 million shares outstanding after the offering (again excluding underwriter options). That market cap is also well above Affirm's last private valuation of $2.9 billion from early 2019.