SAN FRANCISCO--(BUSINESS WIRE)--Osmium Partners today issued a letter to the Redbubble Board of Directors.
Letter #1’s full text is available at www.unlockshareholdervalue.com.
Dear Redbubble Board Members,
Osmium Partners, Ltd. (together with its affiliates, “Osmium” or “we”) has been a long-term shareholder of Redbubble Ltd (“Redbubble” or the “Company”) and currently beneficially owns 15,889,901 ordinary shares or approximately 6% of the outstanding shares. We have had a constructive relationship with Chairwoman Anne Ward and management to date but strongly believe now is the time to face facts and act. Accordingly, we are writing this letter to urge the Company’s Board of Directors (the “Board”) to immediately explore the sale of the company to a strategic buyer.
Why Sell Redbubble Now?
- We strongly believe a strategic buyer such as Etsy, eBay, Amazon, or Walmart Digital could increase Redbubble’s 2025 EBITDA targets from $187 million to $400 million+. We believe if Etsy converted just 5% of its buyers and sellers to Redbubble’s platform, the result would be nearly $800 million in high-margin incremental revenue! Additionally, we believe Etsy’s annual revenue growth rate would increase from 20% to nearly 40% for 2022 and likely drive high growth over the coming years. Lastly, our discounted cash flow model suggests that public markets could add $3 billion-$4 billion to Etsy’s market cap under this accelerated growth trajectory.
- Since 2016 Redbubble has delivered an impressive 233% revenue growth and generated $100 million in free cash flow. In addition, Redbubble total custom t-shirt revenue of $180 million (USD) represents just under 10% of the North American market share of $2 billion in annual sales. We believe this type of strong market penetration could spread to other growing products. Unfortunately, despite these accomplishments, Redbubble has failed to find footing as a public company. Redbubble’s current valuation of 0.6x sales is now 1/10th of our peer universe despite ranking in the top 33% for growth and top 45% for operating cash flow over the last five years. We believe that now is the time to acknowledge the strategic value that has been built but gone unrecognized in the public markets and evaluate the best risk-adjusted path forward.
- Currently, digital marketplaces account for more than $1 trillion in market cap. Given the high barriers to entry, it is less risky and more cost-effective to buy a digital marketplace than to build one from scratch. We believe this dynamic makes Redbubble a highly attractive acquisition candidate especially given robust M&A activity – the top 10 buyers of digital marketplaces/e-commerce have made more than 100 acquisitions. We strongly believe that Redbubble could sell for $5-$7 per share in a well-organized sale process, benefitting employees, shareholders, artists, and customers.
Sincerely,
John H. Lewis on behalf of Osmium Partners, LLC
About Osmium Partners
We seek to generate strong, risk-adjusted returns by investing in undervalued, small capitalization companies across equity markets. Our Osmium 8 research process is based on eight simple factors involving factors such as balance sheet strength, aligned interests, attractive reinvestment opportunities, a low valuation, and reasonable growth prospects. As engaged owners, we actively discuss corporate strategy and capital structure with management teams and boards of directors. We prefer to conduct these discussions in private, but we will publicly debate important items with all shareholders when appropriate. Osmium has appointed over 15 directors to public companies and had in excess of 20 of our public holdings acquired by largely strategic buyers.
Disclaimer
Certain factual and statistical (both historical and projected) industry and market data and other information contained herein was obtained by Osmium Partners from independent, third-party sources that it deems to be reliable. However, Osmium Partners has not independently verified any of such data or other information, or the reasonableness of the assumptions upon which such data and other information was based, and there can be no assurance as to the accuracy of such data and other information. Further, many of the statements and assertions contained herein reflect the belief of Osmium Partners, which belief may be based in whole or in part on such data and other information.
The analyses provided may include certain statements, assumptions, estimates, and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies. Such statements, assumptions, estimates, and projections reflect various assumptions by Osmium Partners concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates, or projections or with respect to any materials herein. Actual results may vary materially from the estimates and projected results contained herein. Past Osmium performance is not indicative of future results. Osmium takes at times highly concentrated positions. Osmium Partners disclaims any obligation to update this letter.
The analyses contained herein are not, and do not purport to be appraisals of the assets, shares or business of any company or any other entity. This document does not constitute any recommendation to buy, sell or otherwise transact with any securities issued by or pertaining to any company or any other entity. Each party to whom this document is made available must make its own independent assessment of any company or any other entity after making such investigations and taking such advice as may be deemed necessary.