Etsy is getting a new board member this month as Marc Steinberg is set to join on February 5, 2024 and Elliott Management takes a sizeable 13% investment in the company.
Feb 1 (Reuters) - Hedge fund firm Elliott Investment has built a 13% economic interest in online marketplace Etsy Inc ETSY.O, CNBC reported on Thursday.
Shares of the company were up about 10% in early trading.
Earlier in the day, Etsy named one of the activist investor's partners, Marc Steinberg, as a director to its board, effective Feb. 5.
"We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation," Steinberg said.
Elliott Investment and Etsy did not immediately respond to Reuters' requests for comment.
BROOKLYN, N.Y., Feb. 1, 2024 /PRNewswire/ -- Etsy, Inc. (Nasdaq: ETSY), which operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world, today announced that its Board of Directors has appointed Marc Steinberg, Partner at Elliott Investment Management, L.P. (together with its affiliates, "Elliott") to the company's Board, effective February 5, 2024. He will also join the Board's Audit Committee.
"We are excited to welcome Marc to the Etsy Board," said Josh Silverman, Chief Executive Officer, Etsy. "Marc brings unique and valuable experience as an investor and board member in the technology, digital media, and e-commerce industries. We've gotten to know Marc, and appreciate his passion for Etsy's mission and excitement about the future growth opportunities for all of our stakeholders."
"Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community," said Marc Steinberg. "We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation. I am looking forward to working with the Board and supporting Josh and the team as they execute on initiatives to improve the customer experience, accelerate top- and bottom-line growth, and drive long-term value."
Chairman of the Board Fred Wilson said, "Marc's appointment reflects our ongoing commitment to enhance the perspectives and expertise on the Etsy Board. We look forward to benefiting from his voice in the boardroom as a seasoned and experienced investor as we continue our journey of creating a leading global e-commerce platform."
At Elliott, Marc Steinberg is responsible for public and private equity investments across a range of industries, including the technology, media, and telecommunications sectors. He currently serves on the boards of directors of Pinterest, Inc. as well as three private companies: Nielsen Holdings, plc, a global leader in audience insights, data, and analytics; Syneos Health, a fully integrated biopharmaceutical solutions organization; and Cubic, a technology-driven provider of solutions for public transit and defense applications. Previously, Mr. Steinberg served as a director of Athenahealth, Inc., a private provider of network-enabled services focused on the healthcare sector. Prior to joining Elliott in 2015, Mr. Steinberg worked at investment bank Centerview Partners. Mr. Steinberg received his A.B. from Harvard College, from which he graduated magna cum laude and Phi Beta Kappa.
Etsy's accompanying 8K filing shows Steinberg will be compensated in line with Etsy's Amended and Restated Compensation Program for NonEmployee Directors, effective as of February 6, 2023.
As a non-employee director, Mr. Steinberg will be compensated for his services pursuant to Etsy's Amended and Restated Compensation Program for NonEmployee Directors, effective as of February 6, 2023 and filed as Exhibit 10.3 to Etsy's Quarterly Report on Form 10-Q for the quarter-ended March 31, 2023.
Etsy also expects to enter into its standard indemnification agreement for directors with Mr. Steinberg, the form of which was filed as Exhibit 10.1 to Etsy's Annual Report on Form 10-K for the year-ended December 31, 2022.
Mr. Steinberg was not selected as a director pursuant to any arrangements or understandings with Etsy or with any other person, and there are no related party transactions between Etsy and Mr. Steinberg that would require disclosure under Item 404(a) of Regulation S-K.
If the name Elliott Management sounds familiar, you may remember the infamous Enhancing eBay letter they published to then CEO Devin Wenig calling for substantial changes at the company.
Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources. By increasing operational efficiency, eBay can free up capital to invest in capability- and revenue-enhancing activities.
...As an online marketplace that provides a critical forum for millions of buyers and sellers, the efficient and effective functioning of the platform is paramount. Unfortunately,eBay has been plagued by technical problems and operational challenges for years...
...Fast forward to recent years and the platform still faces issues. In 2018, eBay sellers complained about countless technical issues including incorrect billing, lost photos, warped titles and many others. On this month’s end of year podcast, eBay senior management apologized to sellers and admitted, “This is a 2018 that we don’t want to repeat on a number of levels. And the technology issues that we have had with the platform is top of the list.”
We agree: The consistent reliability of the platform is central to eBay’s success, and management must do all that it takes to achieve it.
While innovative endeavors in new pursuits like machine learning and augmented reality are promising future technologies,eBay’s publicly touted initiatives in these areas will add little value if the core platform continues to have critical functionality failures.
Many of those same things could be said about Etsy today - users are constantly wondering if new "experience" they see on the site are tests or glitches, and the recent release of a gimmicky AI-powered gift guide arguably adds little value to the core platform if other major issues are not promptly and properly addressed.
Sellers recently made suggestions for what they believe Etsy should focus on in 2024 as part of their "Vital Few" initiatives with addressing rampant reselling, dropshipping, counterfeits, IP infringement and truly "keeping commerce human" topping the list.
Those same issues have been on the radar for investors over the last year as well, with Cintron Research issuing a scathing report about counterfeits on the platform.
More recently, Forbes revealed Etsy has a serious problem with deepfake AI-generated adult content flooding the marketplace.
AI-generated pornographic images of at least 55 well known celebrities were available for purchase until Forbes notified Etsy. Meanwhile, the company’s recommendation and “related searches” feature directed users to even more...
...This publicly-traded company – which amassed a market cap of nearly $10 billion facilitating the sale of tchotchkes and artisanal handicrafts – has a deepfake porn problem, ushered in by the mainstreaming of AI.
It would appear Etsy also has some serious account security and user safety issues to sort out as well, recently announcing they will be making most of their community forum private and restricting API access for certain third party programs as they combat a large wave of recent spam and scam attacks that have mainly targeted new, inexperienced sellers.
Given everything going on at Etsy right now, it's notable that Steinberg will specifically be serving on Ety's Audit Committee.
Etsy also laid off 11% of its workforce in December, including including Chief Marketing Officer Ryan Scott with cost cutting mind.
But that hasn't prevented them from spending big money to go all in on a debut Super Bowl ad and 0% fee promotion for sellers using the Share and Save social media tool.
It will be interesting to see what Elliott Management thinks of this spending spree as they are famously focused on pushing for cutting costs and increasing operational efficiencies in companies where the take a significant stake.