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Here's Why Etsy Stock Is Soaring Today

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Shares of Etsy Inc. (ETSY - Free Report) are soaring on Tuesday morning after reports that activist investors are pushing for big changes at the struggling e-commerce company.

It was revealed late Monday night that two private-equity firms have taken sizeable stakes in Etsy in order to "to engage in discussions regarding strategic alternatives.” The Brooklyn, New York-based company’s stock popped over 20% in morning trading Tuesday after the news began to circulate.

Dragoneer Investment Group reported it now owns 3.7% of Etsy, while TPG Group Holdings boasted a new 4.3% stake in the online retailer. The two hedge funds announced their Etsy holdings in separate Securities and Exchange Commission filings.

Etsy’s CEO Josh Silverman responded to the new activist investors’ requests in a statement:

"We are now reviewing our strategic and operational plans to ensure Etsy is focused on the most value-enhancing near- and long-term opportunities. We will prudently invest in areas that will deliver the greatest returns. At the same time, we see significant opportunities to scale our marketplace business model and drive efficiencies. ... We look forward to providing additional details when our review is completed."

Silverman took over the online crafts website on May 3 after Chad Dickerson stepped down just a day after Etsy posted its first quarter earnings report.

The change at the top came directly after Black-and-White Capital LP—a hedge fund that owns roughly 2% of Etsy—posted a statement condemning the company’s “horrendous search functionality” and “historical pattern of ill-advised spending.” The note continued, saying the hedge fund had “concerns regarding the destruction of shareholder value.”

The shakeup and activist investors’ bold rhetoric for drastic change comes after Etsy posted a loss of $421,000 in the first quarter, down from a profit of $1.2 million in the year-ago quarter.

Etsy’s stock price currently sits at $13.74 per share. But its shares are being traded heavily on Tuesday morning amid the chatter of potentially massive changes coming in the near future—over 9 million shares have traded hands so far today, while the company’s average volume is just 2.5 million.

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