What happened
Shares of ThredUp (TDUP 1.30%) were soaring 12.3% in morning trading Thursday after the online secondhand clothing retailer priced a secondary offering of 6.4 million shares at $24.25 per share, even though that was below yesterday's closing price of $24.51 per share.
So what
ThredUp is issuing 2 million new shares while insiders are selling 4.4 million shares. Gross proceeds are estimated to be $48.5 million and will be used for working capital, general corporate purposes, and to fund the online retailer's growth strategies. An additional 960,000 shares can be purchased by the offering's underwriters within 30 days.
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ThredUp had roughly 18.7 million shares outstanding at last count, which suggests the new shares being issued would dilute existing shareholders by about 2%. Typically, secondary offerings where the stock is discounted as they were in this case, with ThredUp giving buyers a 6% discount, don't usually lead its stock to spike in value.
Yet earlier this week ThredUp's stock had been trading at around $27 a share, and its prospectus estimated at the time the new issue would be priced around $27.50 per share, whereupon the stock tumbled. Essentially the clothing resale leader has made a round trip since then.
Now what
ThredUp sees the resale retail market growing sharply, and it has been signed by a number of major retail partners to handle their own resale business, including Walmart and Macy's.
The proceeds should allow ThredUp to continue investing in its business to handle the additional merchandise that could be needed for its growing list of clients.
