E-Commerce App Wish.com Prepares for $30 Billion IPO

Wish.com is an e-commerce unicorn that sells low-priced goods. It is gearing up for an IPO set to take place before the end of 2020. The e-retailer is targeting a valuation between $25 to $30 billion on the public market. For the past three years, the Wish.com mobile app has been the most downloaded shopping app globally.

“Shopping Made Fun”

Wish uses the tagline “shopping made fun” and has gained a reputation for being one of the largest sellers of discounted Chinese products in the United States. The company is led by CEO Peter Szulczewski, a former Google engineer. He developed the machine-learning algorithm behind the e-commerce platform. It has generated $1.7 billion in revenue in the first nine months of 2020. Like many rapidly growing startups, its losses have grown faster than its revenues. Wish reported a net loss of $176 million in the first nine months of this year.

The stated goal of Wish.com is to provide access to cheap products to the masses. Szulczewski has remarked that his goal is to create: “the largest, most convenient and most affordable shopping mall in the world” with a focus on targeting low-income households. Amazon charges $119 per year for Amazon Prime membership. In contrast, Wish is branding itself as an e-commerce platform affordable to shoppers of all socioeconomic backgrounds. it is focused on value-conscious consumers.

E-Commerce IPO

Wish’s parent company, San Francisco-based ContextLogic, seeks to list its share on Nasdaq under the ticker symbols “WISH”. The IPO is being led by Goldman Sachs, JPMorgan Chase, and Bank of America. Its IPO prospectus provides a sampling of the company’s bargain priced product offerings, such as $3 beauty products and $104 video cameras. The online marketplace includes a broad array of discounted items, such as homeware, apparel, electronic, toys, and personal care products.

The plan is to have a dual-class share structure that will enable Szulczewski to retain majority voting power. Dual-class share structures have been popular among tech companies since they give the founding members more voting power. Class A shares will carry 1 vote per share. Class B shares will carry 20 votes per share. One of the two largest outside shareholders in the company is DST Global. DST is a leading technology investment firm led by billionaire Yuri Milner. The scond outside shareholder is the venture capital firm 8VC.

Wish.com’s Background

Szulczewski co-founded the e-commerce app in 2010 with his friend Danny Zhang. Zhang previously worked at yellowpages.com and met Szulczewski while studying at the University of Waterloo. Szulczewski serves as CEO while Zhang is CTO. Prior to founding Wish, Szulczewski played an instrumental role in writing the algorithms for keyword expansion for Google. He grew up in Poland before moving to Canada to study engineering. Eventually, he found his way to Silicon Valley.

The company has enjoyed widespread success with consumers. Yet the company has had to push back against the public perception that the website promotes the sale of counterfeit and defective goods. Concerns about product quality and safety caused PayPal in 2014 to temporarily place a freeze on processing payments from the website. In response, the company has worked to develop policies and practices to better deter bad actors.

Wish.com Thrives as E-Commerce Platform

In first nine months of 2020, Wish facilitated the sale and shipment of over 640 million items. Wish reported that it has over 100 million active users in over 100 countries. Its audience is largely low to middle income customers. Like many online retail platforms, Wish has benefited from an increase in online shopping activity. This increase stems from the closure of physical stores during the coronavirus lockdowns.

Wish’s IPO prospectus statement filed with the Securities and Exchange Commission reveals a number of important factors that will shape the company’s future outlook. The risk factors section of the prospectus shows a heavy dependence on China-based sellers. The concentration of manufacturers and suppliers in China combined with the reliance on Chinese merchants is a notable risk of the business model. Manufacturing, supply chain, and shipment delays stemming from U.S.-China trade conflicts, Chinese regulations, or other China-based issues could be highly disruptive. Delays caused by the coronavirus pandemic could result in further disruptions.

According to estimates by e-commerce intelligence firm Marketplace Pulse, approximately 94% of Wish’s 500,000 sellers are based in China. The remaining 6% hail from countries such as the U.S., U.K., Canada, and India. Wish is actively working to increase the number of U.S.-based merchants. Amazon and Walmart also have a significant number of merchants and products coming from China. But they have nowhere near the level of dependence on Chinese merchants as Wish. To increase the efficiency of cross-border shipments, Wish is partnering with third-party carriers. It is also developing its own logistics services.

Many IPOs Scheduled for December

Wish joins a list of tech-related startups aiming to IPO in December 2020 such as home-rental platform Airbnb, food-delivery service DoorDash, online gaming company Roblox, and fintech company Affirm. The year 2020 has seen a record number of tech IPOs along with strong investor demand for high-growth tech stocks.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.

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