Fastest Fire Sale Ever: 5x’ing Wish

TLDR:

When I failed as an IG influencer.

Fire Selling Wish for Cash

LBAB Community - My 1st Failed Influencer Attempt

We’ll start where the story ends. It failed quietly.

Back in 2015, I 1st tried becoming an influencer. My best friend from high school and I are really into scotch/bourbon/rye and started an Instagram page called the Whiskey Brothers. This was back in the original explosion of meme accounts and follow for follow bots.

We’d post pictures of bottles we tried, share notes, and post about whiskies we’d like to try one day when we were less broke. We started bringing each other our favorite bottles when we visited each other. 

It was our version of we should buy a bar! And it's exactly what you thought it was gonna be.

Basically, we wanted to be able to fund our whiskexperiences by getting brands to sponsor us. The dream:

• Get free bottles to taste and review.

• Meet other whiskeyheads and learn from them.

• Get more involved in the whiskey community.

And it was 1 heck of an experiment.

My buddy and I came up with a daily posting schedule. We figured out different ways to find relevant content because obviously we weren't drinking seven days a week for health and financial reasons.

But it was a great excuse for us to go and find cool new bars + meet up + do things all around whiskey.

We’d try a whiskey, take a picture of the bottle + glasses, leave a review of it, then post to the ‘Gram. We were playing the hashtag game, the follow-for-follow game, creating interesting content, testing…

Just trying to figure out what would drive engagement.

After months, thousands of dollars and honestly a little bit of whiskey burnout, we decided to pack it in. At the time we didn’t realize how hard and long it was going to be to get to the point where it made money.

The most interesting thing we learned?

Whiskey is a TERRIBLE category for content creators to get into.

Because it's incredibly expensive.

And at the time, we weren't doing remotely well enough to afford luxury whiskey weekly.

But it was such a great experience in:

• How to build content consistently

• What it takes to build an audience

• Content type economics: how long can you afford to create them. 

It takes months - years to build a meaningful audience / community. Creating consistent, durable content for years is very different than doing something fun for the weekend.

Now let’s flip the script to how we’re going to extract more value from Wish than it’s worth.

Let’s Examine This Biz

Wish is worth less than the cash and securities it has on hand. Today, we’re putting on our corp raider armor and stripping this bargain basement app to 5x our money in a year. This, my friends, is what’s called a workout.

Trading at $5.69/share with a $138m market cap, -99% the last 5 years. This biz was a dead man walking.

3 years ago, this biz was valued at $22B. It raised $1.1B in its IPO. And now, it’s worth 50% of its Rev.

This biz isn’t even worth the cash it has on hand. I call this the Bankruptcy Death Knell. Investors know this thing is going to 0 and are running for the hills. But for creative investors, this is where a huge % return can be made.

Financial Summary

This is hands down the worst P&L I’ve ever analyzed for this newsletter. This biz has been so incompetent and financially irresponsible over the past 3 years that if bizs were really human beings we’d be filing negligence charges against the board.

TLDR Analysis: Dead Biz Limping

• Rev fell off a cliff (-50% YoY). 

• Sales & Marketing, R&D, and G&A are all INDIVIDUALLY larger than gross profits. 🤮

• Has $382m in Cash and Equivalents. Hasn’t tapped its $280m Credit Facility.

Sorry I need a minute.

Let’s strip this thing for parts and make sure there’s some value recaptured here.

Let’s Strip This Biz!

This biz isn’t worth owning. I’m sorry to everyone who invested in Wish, but you let them torch $21.9B in Ent value.

We’re going to Fire Sale the Flash Sale platform. Strip it for parts and show how Qoo10 can turn their $180m acquisition into $1B.

1) Shut the Biz down Immediately

The biz has $382m in Cash & Securities. Its acquisition price is $173m. The biz hasn’t even tapped into its $280m Revolving Credit Facility. 

If they shut it down the minute they take over the biz they’ve already made $210m (43%) return.

Ceasing operations would stop the bleeding and allow them to protect the cash they have on hand.

This is all before we even start talking about selling off the assets.

How could a biz with $287m in Rev + $382m in Cash Equivalents be valued at $138m? And bought for $173m?

Because they are unprofitable + torching so much money investors have little to no confidence they can responsibly run the biz. So it’s valued on current cash + Rev on hand, at a 74% discount.

The most financially responsible move is to shut the biz down. Immediately.

It has maybe 18 months before it runs out of cash anyway. All these employees are going to lose their jobs no matter what. Candidly, it isn't worth torching all of that money to watch the Titanic sink.

You go down to a team of 10-20 core people who can keep the lights on, so some money is coming in. And let everyone else go to stop the bleeding as much as possible and protect any cashflow you can.

The last piece would be to furlough the logistics employees just in case there's enough value in bundling that operation and selling it off as a package (more on this later).

Then take the cash out of the biz. There's no point in burning the $380 million that it's in cash and equivalents to watch this thing die anyway. It's much better just to give it a graceful death and let everybody move on with their lives.

Takeaway: Wish is too late to be saved.

2) Spring Flash Sale: Wish’s Assets

Wish has 2 core assets that I’d sell for as much cash as possible.

1. Logistics Infrastructure ($177m ‘23 Rev)

2. Gamified Marketplace app. ($86m in ‘23 Rev)

A) Sell Logistics biz to a 3PL

Logistics was 62% of Wish’s Rev in 2023 and 53% in 2022. This logistics biz was masquerading as a low-priced product marketplace.

Move #1: Sell off the logistics infrastructure to a large 3PL (like Flexport). While it was a bad biz model, Wish did make a massive investment to get products from China to US consumers insanely fast.

Bundle up the real estate, employees, tech, then slap a different logo on the side of the buildings.

If you can plug in that massive infrastructure to sell products that are significantly more valuable, someone will pay the market of 15x earnings on this biz.

Let’s assume it has market 20% NI %.

Est value: $531m

B) Sell the Marketplace

The dream acquirer for this is TJ Maxx for ~$300m (1 year of Rev). I will grovel at TJ Maxx’s doorstep to get this deal done. 

But why would TJ do it?

Tap into the Wish App Gamification to push people in store. The customer overlap of bargain hunters and deal discoverers would be ⛽ on the 🔥 with TJ Maxx’s typical shopping experience.

They can make $$$B by pushing insane deals into local customers’ pockets. eCom doesn’t need to work here. The incremental lift to get customers back in store is a massive marketing lever for them.

The buy vs. build is simple. TJ Maxx can’t do it for cheaper and would lose out on billions in Rev over the next 3 years by not having this live in < 9 months.

Est. value: $300m

Wish has consistently lost $340m the last 3 years. It’s foolish to believe this biz is still worth more together than as parts.

Takeaway: Sell of Logistics & Marketplace to the highest bidder

3) Acquihire the teams + Pack it in

The final step. Getting as many employees new jobs as possible. Acquihiring is a classic Silicon Valley strategy for failed startups when you don't really wanna buy the biz or assets. 

This biz did build something of real value; it was valued at $22 billion at one point. The biz model just didn't work. So, to get everyone new jobs and scrape together some more cash, I’d bundle up the remaining teams.

The Logistics and Marketplace teams would be transitioned with their acquirers.

If TJ Maxx doesn’t want the marketplace team, I’d bundle them with the Ads team. There will be plenty of buyers who are looking for an experienced Marketplace + Ads team to bolster their current efforts. 

(Instacart, I’m looking at you.) 

The team did build a truly unique shopping experience but made the mistake of selling the wrong products to the wrong market. 

Est value: $50m

Takeaway: Always think through your total list of Assets.

Final Thought

Wish is the best ex. of why race-to-the-bottom bizs don't work longterm.

I think the simplest and high level takeaway here is there's no point in innovating in a race-to-the-bottom biz. Once a competitor figures out the playbook, you torched all that money and time for them to clone it with some small improvements.

It’s the same story as Shein and now TEMU.

This meteoric rise and implosions of Flash Sale players unfolds every 5-8 years.

Woot (Amazon) was the first. Then Gilt. Then Wish. And now SHEIN/Temu. The evolution is always the same:

1. Create a novel shopping experience based on cheap products.

2. Raise too much to fund growth

3. Implode at scale when you can’t sell more expensive products.

I wouldn’t waste any $$$ in this space. But there is a great lesson for everybody else.

While these bizs burn mountains of $$ figuring out the next shopping frontier. Wait for them to validate the next model and clone the relevant parts for your shopping experience.

🧠 The Takeaways

Wish is getting purchased for 50% of its cash on hand. An utter failure. How this biz should be stripped:

1. Immediately shut the biz down.

2. Sell off the Logistics and Core shopping units to larger acquirers.

3. Acquihire as much of the team as possible so they have jobs.