Here's Why Etsy Stock Popped This Morning

Shares of handmade goods e-commerce platform Etsy (ETSY 0.34%) popped on Thursday after the company announced that Marc Steinberg is joining the board of directors on Feb. 5. Steinberg is a partner with activist investor fund Elliott Investment Management and serves on multiple boards of directors, including the board for publicly traded company Pinterest. As of 10 a.m. ET, Etsy stock was up about 10%.

Elliott's involvement with Etsy

Activist investors often force their way onto a company's board by buying a stake in the company, believing big changes need to be made to unlock the company's full value. In this case, Elliott Management has made a "sizable" investment in Etsy stock. And according to CNBC's sources, it may amount to a 13% stake.

In this instance, Steinberg's appointment seems to be on the friendlier side. Etsy CEO Josh Silverman cited Steinberg's "unique and valuable experience" as reason to be excited about the move. And Steinberg said he's joining the company because of his belief that "there is an opportunity for significant value creation."

Should investors care?

With a price-to-sales (P/S) ratio of less than 4, Etsy stock is trading at a lower valuation than it has historically. But there's reason for this: Its growth has slowed considerably and it's still shaking off some pricey acquisitions that didn't pan out.

It may take some outside perspective from Steinberg to help kick Etsy back in gear.

It's worth noting that Pinterest stock is up more than 50% since Steinberg joined its board of directors. It would be unfair to attribute this entirely to his presence. However, the company did make some changes that have resulted in renewed growth in recent quarters. Perhaps the same will be true of Etsy within a couple of quarters.

With over 97 million active buyers on the platform, Etsy is still a big, relevant e-commerce platform. The stock has underperformed for a few years now. But the ongoing strength of its user base is enough to hope that management, with the help of Steinberg, can find ways to unlock more of the company's value.