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Business

Poshmark to Sell Itself for Less Than Half Its IPO Price to Korea’s Naver

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South Korean internet giant

Naver Corp.

035420 -8.79%

is paying $17.90 a share in cash for Poshmark, the companies said. Poshmark priced its initial public offering at $42 a share in January 2021 and the shares more than doubled on their first day. The stock has slumped since and closed Monday at $15.57.

The transaction values Poshmark at about $1.6 billion, including about $580 million of cash reserves, Naver said. Poshmark’s peak market capitalization was $7.3 billion, which it hit on the day it went public, according to FactSet.

Poshmark looks and behaves much like Instagram, motivating sellers to give and receive comments and “likes” and allowing users to follow their favorite sellers. Similar to

eBay Inc.,

EBAY 1.11%

sellers take photos of their own items and sell them directly. Poshmark collects fees on sales on its marketplace but doesn’t hold any inventory.

While the Covid-19 pandemic gave a boost to online shopping, Poshmark’s losses have widened and its revenue growth has slowed this year. After reaching $90.9 million in revenue in the March quarter, revenue edged down to $89.1 million in the June quarter and Poshmark forecast it would come in between $85 million and $87 million for the September quarter.

How will the pandemic affect America’s retailers? As states across the nation struggle to return to business, WSJ investigates the evolving retail landscape and how consumers might shop in a post-pandemic world.

Naver is South Korea’s largest web portal and operates as a major search engine ahead of Google locally. It also offers mobile payments and online shopping. Outside Korea, Naver is behind the Line messaging app and is a major operator of webtoons, or digital comics made for reading on online and mobile platforms. In 2021, the South Korean company acquired Wattpad, a Toronto-based storytelling platform, for $600 million.

The companies said the Poshmark transaction is expected to close by the first quarter of 2023. The Redwood City, Calif., company will become a stand-alone U.S. subsidiary of Naver. Poshmark’s founder and Chief Executive

Manish Chandra

and his team will continue to lead the company.

Founded in 2011, Poshmark has billed itself as a way to marry sustainable commerce with social media and says it has more than 80 million registered users. The number of active buyers—people who purchased on the site in the past 12 months—was about 8 million in the last quarter, the company reported. It faces competition from

Etsy Inc.,

eBay,

ThredUp Inc.,

the

RealReal Inc.,

Facebook Marketplace and other marketplaces that let people buy or sell secondhand goods.

The companies said the combination would help Poshmark expand into Korea and other parts of Asia. Poshmark currently offers its app to users in the U.S., Canada, Australia and India. It would also give Naver a bigger foothold in the U.S. market.

Naver expects the deal will enable savings totaling around $30 million for the two companies. That includes gains from reducing redundant costs and Poshmark’s expected gains from accessing Naver’s live-commerce solutions and other technologies, said Kim Nam-sun, Naver’s chief financial officer, in a conference call.

Naver’s shares fell by nearly 9% on Tuesday following news of the Poshmark acquisition.

At a press conference in Seoul, Naver CEO

Choi Soo-yeon

played down the stock slide. The purchase was made at a very reasonable price, she said, expressing confidence that the so-called customer-to-customer market that Poshmark operates in would continue to grow in the years ahead.

With the acquisition, Naver expects to help Poshmark improve its marketing campaigns and to pursue partnerships with the South Korean company’s own offerings. As an example, Ms. Choi cited Weverse, an online marketplace for K-pop merchandise it jointly owns with HYBE Co., the agency behind boy band BTS.

“We will continue to pursue new projects and study the best ways to create service synergies between the two firms,” Ms. Choi said.

Write to Jiyoung Sohn at jiyoung.sohn@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Ernst & Young Leaders Expected to Approve Plan to Split Accounting Company

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Ernst & Young’s leaders are expected this week to give the green light to splitting its auditing and consulting businesses, paving the way for the biggest shake-up in the accounting profession in more than 20 years, according to people familiar with the matter.

The accounting giant’s global executive committee, which oversees the firm’s 312,000-person worldwide network, met on Labor Day to put the finishing touches to the plan for a worldwide breakup, the people familiar with the matter said. The committee is expected to approve the plan later this week, which will trigger votes on the deal by EY’s roughly 13,000 partners, who stand to make windfalls averaging more than a million dollars each.

The split, penciled in for late next year, would separate EY’s accountants who check the books of companies such as

Amazon Inc.

from its faster-growing consulting business of advising on technology, deals and other issues.

EY’s move could radically reshape the accounting landscape if it goes to plan, industry watchers said.

An EY spokeswoman said that discussions were continuing and that “at this time, no decision has been made on moving to the next phase.”

EY is one of the Big Four firms that dominate auditing in major financial markets and whose multibillion-dollar consulting arms compete with the likes of Accenture PLC and International Business Machines Corp.

“There’s a good chance it will cause other big firms to follow suit,” said Martin White, a senior analyst at Source Global Research, a consulting-industry research company. “Who doesn’t want a massive payday if you think it’s there and it’s not going to cause [your business] longer-term harm?”

EY’s rivals say they intend to keep auditing and consulting under one roof. Deloitte held exploratory talks with bankers after news of the EY plan emerged, The Wall Street Journal previously reported, but says it isn’t planning a split. A spokesman said Deloitte “will not separate and split our businesses and we will not monetize our collective life’s work.” KPMG said in a statement that its current model brings a “range of benefits,” and PricewaterhouseCoopers said it is “fully committed” to its multidisciplinary strategy.

EY’s planned split would divide its $45 billion-revenue global network roughly 60:40 between the consulting business and the audit-focused partnership, which would retain the EY brand, according to a May version of the proposal reviewed by the Journal. The new consulting company was forecast to raise some $10 billion by selling a 15% stake to the public at the time of the split, in addition to borrowing $17 billion to help fund partner payouts.

EY’s partners have a strong financial inducement to back the deal. The audit partners are in line for cash payouts, which were in June expected to average two to four times annual compensation. Those multiples may have declined as markets have fallen in recent weeks. Still, the windfalls are expected to be worth well over a million dollars for the typical U.S. and U.K. partners, who earn on average $850,000 to $900,000 a year, according to people familiar with the matter.

On the consulting side, partners are promised shares in the new company, which were in June expected to be worth typically seven to nine times their annual compensation, paid out over five years.

Carmine Di Sibio,

EY’s global chairman and chief executive who has spearheaded the proposed split, is in line for a windfall of tens of millions of dollars, the people familiar with the matter said.

EY’s leaders are expected to say the split will be good for the firm’s finances, as well as their own, according to the people familiar with the matter. They hope the breakup will free the consultants to win billions of dollars of new business, unfettered by independence rules that restrict the work accounting firms can do for audit clients, the people said.

Carmine Di Sibio, EY’s global chairman and chief executive, has spearheaded the proposed split.



Photo:

Hollie Adams/Bloomberg News

EY checks the books of a raft of Silicon Valley giants, including Amazon,

Salesforce Inc.,

Workday Inc.

and Google parent

Alphabet Inc.

That limits its ability to compete in the fast-growing area of consultants teaming up with tech giants to sell outsourced services to companies.

Once the carefully choreographed “go” decision has been announced this week, the firms that make up EY’s roughly 140-country global network are expected to vote on the plans this fall and early next year, according to the people familiar with the matter. The decision, originally scheduled for June, was delayed to make sure the leaders of the U.S. and other big member firms were happy with the proposal, the people familiar with the matter said. The sticking points included the treatment of around $10 billion of promised payments to retired partners, the Journal previously reported.

The decision is also expected to signal the start of negotiations with the Securities and Exchange Commission and other regulators worldwide who will need to sign off on the deal.

The watchdogs are expected to be pleased by the reduction of potential conflicts of interest, a longstanding problem in the industry. They will want to be assured that EY’s audit-focused firm will be sufficiently resilient to withstand potential blockbuster litigation damages, despite its sharply reduced size.

EY is facing multibillion-dollar legal claims in Germany and the U.K. over its allegedly failed audits of two corporate blowups, fintech company

Wirecard AG

and hospital operator NMC Health PLC. EY has said it stands by its audit work.

Another issue that needs clearance by the regulators is branding. Paul Munter, the SEC’s acting chief accountant, said last month that after an accounting firm sells off part of its business, the new entity shouldn’t profit from the accounting firm’s name or logo. The two businesses can’t share any marketing or advertising, he added.

The new EY consulting company will have to spend heavily to build up its new brand, according to Tom Rodenhauser, managing director at Kennedy Research Reports, which analyzes the consulting industry.

Andersen Consulting,

the consulting arm of the former Big Five firm, spent “millions and millions and millions of dollars” on its successful rebranding as Accenture, Mr. Rodenhauser said. “EY consulting will have to make that same kind of investment.”

Write to Jean Eaglesham at Jean.Eaglesham@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Here is what AT&T is giving investors in WarnerMedia spinoff, and how it will work

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AT&T Inc. detailed its plans for the spinoff of WarnerMedia on Friday, with investors eventually expected to receive a share of the new streaming-media entity for every four AT&T shares they own.

AT&T
T,
+2.19%
is in the process of spinning off its WarnerMedia business in a combination with Discovery Inc.
DISCA,
+0.85%,
which executives have said would allow AT&T to refocus attention on core telecommunications efforts. The company expects the deal to close in April, and executives declared plans for a stock dividend to its investors for April 5 at the close of business.

AT&T explained in a Friday release that those who own AT&T shares as of the end of trading April 5 will be able to receive shares of WarnerMedia SpinCo representing 100% of AT&T’s interest in the business. After the transaction closes, expected sometime in April, investors will receive an estimated 0.24 shares of the newly created WarnerBros. Discovery for each share of AT&T they own.

See also: AT&T issues new guidance as WarnerMedia spin draws nearer

The shares created represent about 71% of WarnerBros. Discovery, which will trade under the ticker symbol “WBD” after the spinoff completes. Shareholders “do not need to take any action” as the SpinCo shares will be automatically exchanged on the date the transaction closes, the company reported.

The potential period between the stock dividend and the closing of the deal could create confusion for anyone who wants to buy or sell the stock. The company noted that between April 4, the trading day before the record date for its spinoff distribution, and the closing of the combination with Discovery, there will be two markets for AT&T’s common stock on the New York Stock Exchange.

Those who choose to sell a share of AT&T’s common stock through the “regular way” market will sell both the AT&T share and the right to receive WarnerBros. Discovery shares through the transaction. Those who participate in the “ex-distribution” market will be selling AT&T’s stock while keeping the right to receive WarnerBros. Discovery shares.

Additionally, in the two-way trading window, those who wish to keep AT&T shares while selling the right to receive WarnerBros. Discovery can use a temporary when-issued option that will be available on the Nasdaq.

While AT&T shareholders will still own the same number of AT&T shares after the transaction close that they did just before the transaction close, the company’s stock price is expected to adjust after the deal is complete, reflecting the spinoff.

AT&T’s board of directors also declared a second-quarter dividend of 27.75 cents a share, the first quarterly dividend under a reduced annual payout that executives outlined last month. The dividend will be payable on May 2 for shareholders of record as of April 14.

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Business

Facebook’s Cryptocurrency Venture to Wind Down, Sell Assets

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Facebook’s ambitious effort to bring cryptocurrency to the masses has failed.

The Diem Association, the consortium Facebook founded in 2019 to build a futuristic payments network, is winding down and selling its technology to a small California bank that serves bitcoin and blockchain companies for about $200 million, a person familiar with the matter said.

The bank,

Silvergate Capital Corp.

SI -2.52%

, had earlier reached a deal with Diem to issue some of the stablecoins—which are backed by hard dollars and designed to be less volatile than bitcoin and other digital currencies—that were at the heart of the effort.

The sale represents an effort to squeeze some remaining value from a venture that was challenged almost from the start. Facebook, now

Meta Platforms Inc.,

FB -1.84%

launched the project in 2019 as Libra, pitching it as a way for the social network’s billions of users to spend money as easily as sending a text message.

Bloomberg earlier reported that Diem was considering selling its assets.

Libra brought on well-known partners in e-commerce and payments including

PayPal Holdings Inc.,

Visa Inc.

and Stripe Inc.—in part to signal buy-in from the finance industry and in part to distance the project from Facebook itself, which was under pressure about policing its platform. Partners agreed to join the Libra Association, a Switzerland-based group that would govern the stablecoin, and pony up millions of dollars each to develop the project.

But it almost immediately ran into resistance in Washington. Officials voiced concerns about its effect on financial stability and data privacy and worried Libra could be misused by money launderers and terrorist financiers. Federal Reserve Chairman

Jerome Powell

said the central bank had serious concerns. Early backers dropped out, and

Mark Zuckerberg

was called before Congress, where he defended Facebook’s plan to bring financial services to the world’s underbanked.

In 2020, the group recruited

Stuart Levey,

a former U.S. Treasury official and top lawyer at HSBC Holdings PLC, as chief executive and ditched the Libra name in favor of Diem.

The stablecoin deal with Silvergate was part of a revamp last year meant to appease regulators.

David Marcus,

the Meta executive who oversaw the launch of what would become Diem, left the company last year.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the January 27, 2022, print edition as ‘Facebook Gives Up Crypto Effort.’

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Business

IBM Sells Watson Health Assets to Investment Firm

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International Business Machines Corp. agreed to sell the data and analytics assets from its Watson Health business to investment firm Francisco Partners, the companies said Friday.

The deal is the latest step by IBM to refocus its core business around the cloud. The Wall Street Journal reported last year that IBM was exploring a sale of its healthcare-analytics business as a way to streamline the computing giant’s operations and sharpen its focus on computing services provided via the internet. The Watson Health business uses artificial intelligence to analyze diagnostic tests and other health data and to manage care.

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Business

AT&T Shed Media Assets in 2021. This Year It Wants to Add Investors.

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AT&T Inc.

T 0.83%

faces a busy year as it tries to complete a divorce with its entertainment business, ease investor concerns about its dividend and show that it can continue to woo new wireless customers.

The Dallas conglomerate spent much of 2021 on what amounted to a gut remodel. It kicked off a series of big divestitures spanning pay TV, media production and advertising, moves aimed at refocusing AT&T on more predictable growth opportunities from profit centers such as wireless and broadband service.

Wall Street analysts broadly welcomed the changes. The stock price didn’t reflect a similar embrace by investors.

AT&T’s shares slumped 14% in 2021 and briefly touched 12-year lows in December before recovering. The selloff has pushed its dividend yield—a ratio reflecting the cash a company pays its shareholders divided by its stock price—above 8%. The S&P 500 gained 27% in 2021.

Chief Executive Officer

John Stankey

in June called the period “a hard year that’s been full of anxiety.” By December, he said he hoped that within another year “our attention will be entirely on the future and not on what we needed to do to reposition or restructure the business.”

On Wednesday, AT&T said its core wireless unit added about 880,000 postpaid phones in the fourth quarter, topping the 800,000-phone gain in the same period of 2020. The company’s WarnerMedia unit ended 2021 with 73.8 million global HBO subscribers, ahead of its 70 million to 73 million target.

AT&T in May announced plans to spin off WarnerMedia, the entertainment empire it acquired in 2018, into a new joint venture with Discovery Inc. The transaction secured European competition authorities’ approval in December but is still under review in the U.S. and other countries.

AT&T shareholders will keep a 71% stake in the new media creation, so the company’s stock price partly reflects how the market values that future media business, which will be called Warner Bros. Discovery.

The telecom company that remains is expected to pay shareholders a lower annual dividend. Executives have said the yearly payout will fall from about $15 billion to between $8 billion and $9 billion after the media spinoff closes. An AT&T spokesman pointed to executives who have said that amount will still make it one of the top-yielding companies among dividend payers.

David Jeffress,

portfolio manager at Laffer Tengler Investments, said his firm had owned AT&T shares but sold them in early 2021. He cited the dividend reduction among his concerns.

“Once you’ve cut your dividend, and that level of uncertainty is incorporated, it’s really hard to kind of regain the confidence of a dividend investor,” he said. “We may re-enter it at some point in the future, but really we’d want to see the dust settle.”

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A second factor depressing AT&T’s shares has also punished its close rivals. Shares of

T-Mobile US Inc.

and

Verizon Communications Inc.

sank nearly as much as AT&T’s in 2021, as all three carriers offered deep discounts to keep and attract customers.

Those discounts, coupled with a surge of federal government subsidies tied to the coronavirus pandemic, helped cellphone carriers post unusually strong growth. The top three operators gained nearly 5 million postpaid phone connections—a closely watched metric—over the nine months that ended in September.

The subscriber surge prompted some market watchers to question how long the good times can last.

Jeff Moore,

a wireless-industry analyst for Wave7 Research, likened such explosive growth to all 32 NFL teams winning the same Super Bowl.

“It just doesn’t make sense,” he said. “You would think that someone is losing and someone else is gaining.”

“‘Once you’ve cut your dividend, and that level of uncertainty is incorporated, it’s really hard to kind of regain the confidence of a dividend investor.’”


— David Jeffress, portfolio manager at Laffer Tengler Investments

AT&T’s rivals have pointed the finger at its now year-old marketing blitz, which offered deep smartphone discounts for new and existing customers, as the start of a race to the bottom that could eventually hurt industry profitability.

AT&T’s leaders have said their wireless customer growth is durable. They have cited smarter marketing and improving traction in the public-safety market, as well as discounts, among the factors helping their results.

Mr. Moore agreed and said Verizon is the most vulnerable to slumping customer growth this year because its retail marketing operation has lost ground to more aggressive rivals. A Verizon spokesman declined to comment.

“There’s too much skepticism about AT&T,” the analyst said. “They’ve really turned around their results.”

Some shareholders weren’t willing to wait.

Jerry Braakman,

chief investment officer at First American Trust, said his firm held AT&T shares in client portfolios for several years before selling them in December 2020. He said the pandemic’s reordering of the winners and losers in the film industry kept AT&T’s WarnerMedia unit from delivering on its promise.

“AT&T looked like their strategy was struggling, so we decided not to continue to ride something down,” he said. “Sometimes you have to cut your losses and move on.”

John Stankey talks about AT&T’s future as a streaming service and how its theatrical distribution has been affected by the pandemic with WSJ editor in chief Matt Murray at the WSJ Tech Live 2020. Photo: John Lamparski/Getty Images (Video from 10/19/2020)

Other investors are looking to profit from the pessimism.

Ryan Kelley,

chief investment officer and portfolio manager at Hennessy Funds, said his firm still owns AT&T shares in a value-style fund that focuses on stocks with high dividend yields.

“With the dividend being what it is and with analysts becoming more comfortable with where they are now, we’re hoping for better returns here forward,” he said. “Hopefully most of the downside has already been priced into the stock.”

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Karen Langley at karen.langley@wsj.com

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Business

Another day, another Tesla stock sale for Elon Musk: $8.8 billion over past 7 days

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Elon Musk sold a large chunk of Tesla Inc. stock for the seventh straight day Tuesday, bringing him nearly halfway to his Twitter promise of selling 10% of his stake in the company.

According to filings with the Securities and Exchange Commission, Musk exercised more of his options and sold more than 934,000 shares Tuesday, for roughly $973 million. That followed a $930 million stock sale Monday.

In total, Musk has sold about 8.16 million shares for $8.8 billion since Nov. 8, a day after Musk’s Twitter poll decided he should sell 10% of his Tesla stake. Some of the stock sales had been put into motion well before the poll was posted.

Assuming Musk intends to sell 10% of his shares, he’s nearly halfway there. Before the sales began, his 10% stake amounted to about 17 million shares — so after Tuesday’s sales, he would have about 8.84 million shares to go.

Musk, the world’s wealthiest man, has millions of stock options that he needs to exercise by August 2022, and Musk said in September that he intended on selling a large chunk of stock in the fourth quarter. CNBC reported last week that Musk faces about a $15 billion tax bill on those options.

Tesla shares
TSLA
stopped their slide Tuesday, rising about 4%, after sinking more than 17% since Musk’s stock selloff began Nov. 8. The stock is up 50% year to date, and has gained 139% over the past 12 months.

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Business

Goldman, Morgan Stanley Limit Losses With Fast Sale of Archegos Assets

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Goldman Sachs Group Inc. and Morgan Stanley were quick to move large blocks of assets before other large banks that traded with Archegos Capital Management, as the scale of the hedge fund’s losses became apparent, according to people with knowledge of the transactions. The strategy helped limit the U.S. firms’ losses in last week’s epic stock liquidation, they said.

Losses at Archegos, run by former Tiger Asia manager Bill Hwang, have triggered the liquidation in excess of $30 billion in value. Banks were continuing to sell blocks of stocks linked to Archegos Monday, traders said.

“This is a challenging time for the family office of Archegos Capital Management, our partners and employees. All plans are being discussed as Mr. Hwang and the team determine the best path forward,” a company spokeswoman said in a statement Monday evening.

Archegos took big, concentrated positions in companies and held some positions in a mix of stock and swaps. Swaps are a common arrangement in which a trader gets access to the returns generated by a portfolio of shares or other assets in exchange for a fee.

Losses threatened to spill over into the so-called prime brokerage businesses that have been handling the firm’s trading. The group of large Wall Street banks includes Goldman, Morgan, Credit Suisse Group AG, Nomura Holdings Inc., UBS Group AG and Deutsche Bank AG , said people familiar with the firm’s trading.

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Business

IBM Explores Sale of IBM Watson Health

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International Business Machines Corp. is exploring a potential sale of its IBM Watson Health business, according to people familiar with the matter, as the technology giant’s new chief executive moves to streamline the company and become more competitive in cloud computing.

IBM is studying alternatives for the unit that could include a sale to a private-equity firm or industry player or a merger with a blank-check company, the people said. The unit, which employs artificial intelligence to help hospitals, insurers and drugmakers manage their data, has roughly $1 billion in annual revenue and isn’t currently profitable, the people said.

Its brands include Merge Healthcare, which analyzes mammograms and MRIs; Phytel, which assists with patient communications; and Truven Health Analytics, which analyzes complex healthcare data.

It isn’t clear how much the business might fetch in a sale, and there may not be one.

IBM, with a market value of $108 billion, has been left behind as cloud-computing rivals Microsoft Corp. and Amazon.com Inc. soar to valuations more than 10 times greater. The Armonk, N.Y., company has said it’s focused on boosting its hybrid-cloud operations while exiting some unrelated businesses.

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