Focus Shifts to Core Domestic U.S. Market
In a strategic move, ThredUp has divested its European business to concentrate on its core domestic U.S. market. This decision comes after the company expanded into Europe in 2021 through the acquisition of Remix, a Bulgarian startup that operates across central and eastern European markets.
Background on ThredUp’s Expansion
Founded in 2009, ThredUp specializes in second-hand clothing and accessories. Prior to its 2021 IPO, the company had raised over $300 million. However, like many startups that went public during this period, ThredUp hasn’t enjoyed a stellar ride. Its market cap plummeted from a $1.3 billion valuation at its IPO to a low of just $60 million last month.
European Business Performance
ThredUp confirmed in its Q2 2024 earnings report that it was exploring the sale of Remix to focus entirely on the U.S. The reason behind this decision is twofold: European revenue had dropped 18% year-over-year to $13 million, while gross profit had fallen 25% to $3.6 million.
Management Buyout and ThredUp’s Involvement
At its Q3 earnings last month, ThredUp stated that it had signed a non-binding agreement with Remix management for a buyout. Building on this momentum, which saw better-than-expected Q3 earnings and guidance, ThredUp’s shares have soared to nearly $200 million.
A recent filing with the Securities and Exchange Commission (SEC) revealed that Florin Filote, the newly appointed general manager of ThredUp’s European operations, has led a management buyout. This deal includes Filote paying just €1 (one euro) for 91% of the common stock in a new entity called Remix US Holdings.
ThredUp’s Investment and Debt Element
While the purchase price might seem low, there is a catch. In addition to retaining a 9% stake, ThredUp has issued Remix a convertible promissory note for €61.6 million ($64.7 million) plus interest. This represents the investment ThredUp made in Remix since its acquisition three years ago.
This debt element becomes repayable in 2034 or when a liquidity event occurs before then, such as an acquisition, IPO, or other third-party investment. The transaction will allow ThredUp to focus on its core U.S. business and continue innovating and evolving its marketplace.
Statement from ThredUp’s CEO
"This is a mutually beneficial outcome for both ThredUp and Remix," said James Reinhart, co-founder and CEO of ThredUp. "We are confident that Remix will thrive under Florin Filote’s leadership and the team’s expertise."
Key Takeaways
- ThredUp has divested its European business to concentrate on its core domestic U.S. market.
- The company’s European revenue had dropped 18% year-over-year to $13 million, while gross profit had fallen 25% to $3.6 million.
- A management buyout led by Florin Filote includes ThredUp retaining a 9% stake and issuing Remix a convertible promissory note for €61.6 million ($64.7 million) plus interest.
Conclusion
ThredUp’s decision to divest its European business marks a significant shift in focus for the company. By concentrating on its core domestic U.S. market, ThredUp can continue innovating and evolving its marketplace while navigating the complexities of the second-hand clothing and accessories industry.
