Investment firms TPG, Dragoneer reveal stake in Etsy

Investment firms TPG Group Holding Advisers Inc and Dragoneer Investment Group LLC jointly reported an 8 percent stake in Etsy Inc, the Brooklyn-based online retailer of handmade goods, Etsy disclosed in filings on Monday.

The disclosure comes just weeks after activist hedge fund Black and White Capital LP, which owns roughly 2 percent of Etsy, urged the company to explore a potential sale. Etsy's shares have fallen more than 30 percent since their initial public offering (IPO) two years ago.

Etsy shares jumped more than 8 percent in after-hours trading to $12.30.

TPG "has contacted representatives of Etsy to offer to engage in discussions regarding strategic alternatives," it said in a filing with the U.S. Securities and Exchange Commission, where it disclosed a 4.3 percent stake. Dragoneer has a 3.7 percent stake.

"We are now reviewing our strategic and operational plans to ensure Etsy is focused on the most value-enhancing near- and long-term opportunities," Etsy's CEO Josh Silverman said in a statement in response to the filings on Monday.

Silverman, a former eBay Inc executive, was appointed CEO two weeks ago. He took the role from Chairman and CEO Chad Dickerson, who stepped down after nine years in the seat. The role of chairman went to Etsy board director Fred Wilson.

Etsy was a darling of the artisanal set at the time of its IPO, but it has struggled as sales have slowed and new channels, such as Facebook Inc's Instagram Inc have created alternative platforms for the independent sellers Etsy caters to. The company has also had to pour more money into marketing, after years of being able to rely on word-of-mouth.

Etsy, which reported a net loss of $421,000 this quarter, announced it is laying off 80 people, roughly 8 percent of its workforce, earlier this month.

It is not uncommon for private equity firms to do so-called "toehold investments" for reasons that include long-term investing and getting to know management. While such investments can sometimes morph into deals, as with Leonard Green & Partners LP's investment in BJ's Wholesale Club Inc, they often do not.

Dragoneer, an early stage investor in Etsy, has worked with TPG before, including its investment in music streaming service Spotify Ltd.