1stdibs $DIBS is an online marketplace that serves as an intermediary connecting buyers & sellers in a business model akin to Etsy or the original eBay.
It has a market cap of $200mm and holds $161mm of cash on its balance sheet. DIBS was a high-flyer in the private markets. It boasted a valuation of $500mm in its Series D round (receiving financial backing from high-profile names such as T. Rowe Price, Benchmark, and Insight Partners). In June 2021, DIBS took advantage of the buoyant equity markets and raised $123mm at $20/share.
Its stock has promptly shed 75% of its value in the last 11 months:
DIBS checks the box of nearly everything that is currently out of favor. Retail, high growth, high marketing, unprofitable, new offering. The macroeconomic environment has become challenging and unpredictable, damaging DIBS’s 2022 growth prospects. Q2 guidance implies this quarter’s free cash flow burn could be the Company’s worst as a public company. But given the absolute beating its stock price has taken, I thought DIBS merited a closer look.
I like its asset-light marketplace business model – it can print free cash flow if it gets to critical mass (see: Etsy). And DIBS is well-capitalized, so it won’t have to go back to the equity market anytime soon (ideally, never). That’s a good thing because it has significant low-hanging growth opportunities in front of it. If DIBS can weather short-to-medium term macro headwinds with a laser focus on free cash flow, I suspect it will be well-positioned to reap the benefits of its inherent operating leverage once the tide turns and growth returns.
Plus, 1stDibs is a one-of-a-kind digital asset. It will likely draw takeover interest from strategic buyers in the future - potentially sooner rather than later if the stock price languishes.
