Doing a deep dive on one of the more intriguing IPOs of early 2021.

I'm talking about Poshmark ($POSH) which went public on Thursday

A thread

Poshmark is a second hand clothing marketplace and social network based in Redwood City, Ca

The company had a huge 2020 as consumers flocked to the site and mobile app to resell their old clothes during lockdowns.

You can look at Poshmark as an eBay-type operation that simply act as the middleman between buyer and seller.

The company takes a 20% cut for all sales above $15.

Not bad in a world where service business margins are plummeting year after year.

Which is one of the main strong points of Poshmark's business model - the company doesn't carry any inventory.

At the end of September 2020, the company had 32 million active users (up more than 100% from the previous year) who have now made a collective $2 Billion on the platform.

And turned a profit in the previous 2 quarters.

Which is refreshing to see in a world

Where we almost expect any public company

To make a loss for their first 2-4 years on the stock market.

But it's still difficult to get excited about a second hand marketplace

This is why the social element of Poshmark's business is so important.

Users access the service via an Instagram-feed type layout rather than a standard eCommerce store...

Which encourages increased browsing time... and ultimately more $$$ spent by users.

That's where the real potential of the platform lies because that's where the advertising dollars get spent

And a huge reason why $PINS was one of the top stocks for the past 2 years

I still have my reservations about just how many users they can attract outside of their target audience

Which is primarily Gen Z and Millenial women.

There is also stiff competition from ThredUp, which is scheduled to go public this year, legacy websites like eBay and niche resale hubs.

The other issue with companies dealing with second-hand goods and third-party sellers is potential fraud in the form of fake goods.

eBay dealt with this throughout the 2000s, and ultimately this was a big reason why Amazon was able to overtake it in the eCommerce battle.

Poshmark may never be able to shy away from this and I fully expect multiple "fake clothing" scandals in the next 12 months.

But rather predictably, the stock shot up on Day 1

(142% for those of you counting)

So I won't be taking a position just yet - I'd like to see a few more quarterly reports before diving deeper into this one.

But let me know, did you invest in $POSH this week?

Special thanks to @TheStacksMarket for his IPO threads

If you enjoyed this breakdown please consider RT'ing the first post

Oliver