Gig-economy companies haven’t received a very warm welcome from Wall Street in recent months, but another one is about to test the waters — and this one literally has the trademark on the word “gig.”
Fiverr International Ltd. FVRR, +0.00% priced its initial public offering at $21 a share Wednesday night, above its range of $18-$20 a share. The company plans to offer about 5.26 million shares, raising more than $110 million, with underwriters having a 30-day option to purchase another 789,000 shares. It plans to start trading Thursday on the New York Stock Exchange under the ticker “FVRR.”
The company’s business — linking freelancers and companies looking to hire them — may sound familiar to IPO watchers: Before Lyft Inc. LYFT, +0.59% and Uber Technologies Inc. UBER, -0.66% hit the public markets with a splat, a similar gig-economy company made its debut. Upwork UPWK, -3.77% which designs software that connects freelancers with companies that need workers, saw its shares jump 50% on their first day of trading in October, but they’re now back to trading around their initial-public-offering price of $15.
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Though Upwork’s status as an enterprise software player seemed to initially resonate with investors, the company recently posted a string of disappointing earnings reports, suggesting to some analysts that Upwork’s efforts to expand its appeal might take more time to play out. Any effect of that experience might be felt as Tel Aviv-based Fiverr looks to find investors and as Uber and Lyft also struggle for gains.
Here are five things to know about Fiverr’s coming IPO.
Talking like a marketplace
Fiverr helps workers find places to work, but the company uses marketplace lingo in describing what the business is all about. Companies that list positions on the site are called “buyers” throughout Fiverr’s prospectus, while freelance workers are known as “sellers.”
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“We designed our platform to make it easy for our buyers to find and purchase the digital services they are looking for without time-consuming negotiations or uncertainty of pricing, while offering them what we believe to be the best value for their money,” Fiverr said in its filing. “At the same time, we enable our sellers to reach a large buyer universe, allowing them to spend more time on doing what they love and are best at, rather than on demand generation, contract negotiation, payment collection and other requirements of running a digital services business.”
Fiverr also highlights its “over 200 categories of productized service listings,” which the company calls Gigs with a “®” symbol because it trademarked the word. Categories include voice-overs, logo design and translation services.
A bet on the freelance movement
Fiverr sees numerous societal trends underpinning its business, including that people are more inclined to work remotely and “independently.” Businesses, according to Fiverr’s prospectus, want temporary “talent” that’s also “cost effective.” The company sees a total addressable market within the U.S. of $100 billion.
Though Fiverr doesn’t mention Upwork by name in its prospectus, the company contends that it competes with many different companies when it comes to serving freelancers. These range from traditional staffing agencies to other online freelance platforms, to businesses that specialize in distinct professional services like accounting and marketing.
Subject to regulatory risk
While many workers are drawn to flexible roles, the gig-economy movement has faced scrutiny, particularly because it has enabled companies to classify workers as contractors rather than employees who would be entitled to certain benefits and wage protections. Fiverr admits that policy changes could make it more difficult for companies to designate their workers as contractors, which could make the freelance model less appealing from an employer perspective.
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“Recent financial, political and other events may increase the level of regulatory scrutiny on larger companies, technology companies in general and, in particular, companies engaged in dealings with independent contractors or payments,” the company lists among its risk factors. “Regulatory agencies may enact new laws or promulgate new regulations that are adverse to our business, or they may view matters or interpret laws and regulations differently than they have in the past or in a manner adverse to our business.”
Growing revenue, swelling losses
Fiverr reported $75.5 million in revenue last year, up from $52.1 million a year earlier, but the company’s losses deepened as it grew. Fiverr posted a net loss for 2018 of $36.1 million, compared with a net loss of $19.3 million in the prior period.
The company might be on a better track this year, if its first-quarter numbers are any indication: Fiverr lost $8.3 million in the first three months of 2019, compared with $16.3 million in the year-earlier period.
Room to grow
In the latest fiscal year, Fiverr generated 57% of its revenue from existing “buyers” and 43% from new buyers. As of the 12 months ended in March, the company’s platform had 255,000 active sellers and 2.1 million active buyers.
Part of the company’s growth strategy involves convincing current customers to conduct more business through its platform. Fiverr expects that by adding new categories of jobs, it will be able to better serve its customers’ broader business needs. The company also plans to use artificial intelligence and personalization technology to recommend specific services and categories based on past transactions.
Other growth plans hinge on geographic expansion. Fiverr gets 70% of its revenue from the U.S., the U.K., Canada, Australia, and New Zealand, but it’s working to broaden its platform and support more languages besides English.
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