Wish parent’s IPO off to poor start

Written by: Jayson Derrick
December 16, 2020
  • Shares of ContextLogic traded for the first time ever on Wednesday.
  • The company owns Wish.com, a popular e-commerce platform known for mass produced items at good prices.
  • Shares sold off more than 10% after its IPO debut.

Shares of ContextLogic Inc. (NASDAQ: WISH) traded for the first time on a public exchange Wednesday morning and moved in the opposite direction of recent IPOs.

Looking for a refresher course on IPOs before proceeding? Check out this in-depth guide.

About ContextLogic

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ContextLogic is the parent company of Wish, an e-commerce platform that sells anything and everything from apparel to kitchen items. The company’s core website Wish.com stood out during the COVID-19 pandemic as a go-to site for mass-produced and cheap items.

According to The Wall Street Journal, ContextLogic has never turned an annual profit since at least 2015. But it did report a profit in the first half of 2019 — nine years after it was founded.

For the first nine months of 2020, the company recorded a loss of $176 million on revenue of $1.75 billion. This compares to a loss of $5 million on revenue of $1.33 billion in the same quarter last year. During the recent third quarter, revenue was up 33% year-over-year to $606 million, according to WSJ.

Wish’s platform boasts more than 100 million monthly active users in more than 100 countries, according to WSJ. Most of the sellers are located in China although management noted U.S. merchants grew significantly in 2020.

IPO launch

Prior to Wednesday’s launch, the company was valued at $16.2 billion based on its IPO price of $24 a share. But shares opened for trading at $22.75 before 12:00 pm EST and the stock couldn’t catch a bid. By 1:00 pm, shares were down more than 10% at $21.37.

By contrast, the recent IPO of DoorDash Inc. (NASDAQ: DASH) ended with the stock soaring higher by more than 85% on its opening day on Dec. 9. Similarly, Airbnb Inc. (NASDAQ: ABNB) saw its shares more than double on its debut day.

Investors and traders may have found fault with the company’s IPO prospectus that showed slower growth rates versus other e-commerce players, according to CNBC. Specifically, revenue for the nine-month period ended Sept. 30 was up just 32% versus Amazon.com, Inc. (NASDAQ: AMZN) that showed 38% growth.

CEO plays offense and defense: profit will be seen, we aren’t a dollar store

ContextLogic CEO Peter Szulczewski was on CNBC’s “Squawk on the Street” to pitch his company’s stock to investors. He said so long as management focuses on its core proposition of delivering value to customers through a fun experience, it will become a profitable company in the future.

One of the biggest misconceptions about Wish’s platform is it is akin to a giant virtual dollar-store. The company does focus on value and giving consumers the best “bang for the buck” to an under-served demographic group.