Fashion resale marketplace ThredUp has divested its European business to focus on its core domestic U.S. market.
ThredUp expanded into Europe in 2021 with the acquisition of Remix, a Bulgarian startup that operates across a handful of central and eastern European markets. Back in May, ThredUp announced a new general manager, Florin Filote, to lead its European operations‚ and Filote is now leading a management buyout of the unit he leads.
Founded in 2009, ThredUp specializes in secondhand clothing and accessories, and went on to raise north of $300 million ahead of its 2021 IPO. As with many startups that went public during that period, ThredUp hasn’t enjoyed a great time of it, with its market cap dropping from a $1.3 billion valuation at its IPO, to a low of just $60 million last month.
The company confirmed at its Q2 2024 earnings in August that it was exploring a sale of Remix to focus entirely on the U.S. The reason, it seems, was that its European revenue had dropped 18% year-on-year to $13 million, while its gross profit had fallen 25% to $3.6 million.
At its Q3 earnings last month, ThredUp said it had signed a non-binding agreement with Remix management for a buyout, building on a broader momentum that saw better-than-expected Q3 earnings and guidance, with its shares since soaring to nearly $200 million.
In a filing with the Securities and Exchange Commission (SEC) today, ThredUp confirmed some of the details of the transaction, revealing that Filote paid just €1 (one euro) for 91% of the common stock in a new entity called Remix US Holdings. ThredUp says it also made a “final cash investment” of $2 million into Remix to see it through its initial period as an independent entity.
The purchase price might seem low, but there is a catch. In addition to the 9% stake retained by ThredUp, Remix has issued ThredUp a convertible promissory note for €61.6 million ($64.7 million) plus interest, which represents the investment ThredUp had made in Remix since its acquisition three years ago.
So there is a big debt element at play here, too. This becomes repayable in 2034, or when a liquidity event occurs before then, such as an acquisition, IPO, or some other third-party investment.
“This is a mutually beneficial outcome for both ThredUp and Remix,” ThredUp co-founder and CEO James Reinhart said in a statement. “We are confident that Remix will thrive under Florin Filote’s leadership and the team’s expertise. This transaction will allow ThredUp to focus on our core U.S. business and continue to innovate and evolve our marketplace.”