Etsy announced it has entered into a quota purchase agreement, selling the parent holding company of Elo7 Serviços de Informática S.A. (“Elo7”) to Brazilian corporation Enjoei S.A.
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Elo7, often referred to as the “Etsy of Brazil,” was acquired by Etsy only two years ago. However, over the past couple of years, Elo7’s performance has failed to meet expectations, prompting the decision to sell.
During a recent earnings call, Rachel Glaser, Etsy’s CFO, candidly referred to Elo7 as “tiny” and acknowledged that the division is not yet profitable. The lack of attention given to Elo7 during the Q1 2023 earnings call seems to further suggest that Etsy had been considering divesting the division.
Etsy’s CEO, Josh Silverman, explained the rationale behind the decision, stating, “Although the Elo7 team has worked very hard to build a beloved marketplace and vibrant community in Brazil, we have not seen the performance we had anticipated when we made this acquisition two years ago, in part due to the macroeconomic environment.”
Silverman emphasized that selling Elo7 is in the best interest of Etsy, its shareholders, other stakeholders, Elo7 employees, as well as the buyer and seller communities on Elo7. After the transaction closes, which is expected in the third quarter, Etsy’s House of Brands will consist of three scaled, global marketplaces: Etsy, Reverb, and Depop.
Furthermore, an underlying reason for divesting Elo7 seems to be Etsy’s focus on strengthening its core marketplace, which serves as the company’s primary revenue source.
By shedding a small and unprofitable division that would likely require significant time and effort to grow, Etsy can concentrate its resources on expanding its core marketplace. Ultimately, the decision appears to align with Etsy’s long-term growth strategy.
Terms of the transaction were not disclosed.
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