[Request] Music Magpie IPO

Probably a little early but scheduled for an IPO this year and rumoured in could happen next month. For those who have the fortune of not owning a TV Music Magpie is a ‚Äúrecommerce‚ÄĚ site that purchases people‚Äôs unwanted CDs, DVDs and electronics and resells them.

Current the third highest ranked Amazon seller in the world, and second top eBay seller. Their US subsidiary is 12th and 5th respectively. Needless to say they have a very good relationship with these all-powerful platforms which is important.

2018 Revenue was £115m with negative EBITDA, 2019 Revenue was £130m, with £4m in EBITDA. This year Revenue increased 18% to £153m with EBITDA up 217% to £13m. Prolific North report it could debut at around £250m.

Some US peers are Envela Corporation and RealReal. In the UK the only comparable I can think of is AO, which has a large recycling division. AO and Envela both trade around 1.5 EV/Sales and 30 EV/EBITDA, with RealReal at a significant premium to that due to the fashion focus. If we use the first two we get a fundamental value of between £300-400m for MM. Recent ecommerce IPO Moonpig trades at around 8 times sales but is much more profitable, which is why its worth £1.5bn at roughly 30 times earnings (not to mention faster sales growth).

Very importantly, this stock would gain the Green Economy Mark and ESG is at the forefront of everyone’s minds. From the article above:

Last year, musicMagpie gave a ‚Äúsecond life‚ÄĚ to 400,000 consumer technology products, preventing 2,500 tonnes of mainly plastic waste from going into landfill.

It sells increasingly through its own store, but also has a deal to supply Poundland, which seems to be very successful (its often easy to forget physical formats are still really popular!), as well as other wholesale channels. The electronics and books sides definitely reduce the risk of lower demand for discs.

What do you think, are people looking forward to this one? I like this ecommerce play with an ESG tilt but its concentrated on two key markets, which could be good and bad.