Amazon’s third-party seller Pharmapacks plans to go public via PSPC

America’s best seller in Amazon’s sprawling marketplace is embarking on the PSPC boom.

Packable, the parent company of Pharmapacks, announced Thursday that it plans to go public through a merger with Highland Transcend Partners I Corp., a specialist acquisition company. The deal will value the combined company at $ 1.55 billion.

Pharmapacks began as a physical pharmacy business in 2010, and has since grown to become Amazon’s # 1 seller in the United States, based on the number of consumer reviews, according to research firm Marketplace Pulse. The company offers a range of health, personal care and beauty products in several online marketplaces.

The SPAC is the latest sign that Amazon’s booming third-party market is attracting investors, who see another money-making opportunity on the shoulders of the largest ecommerce site. The marketplace offers products from millions of sellers and now accounts for more than half of Amazon’s overall retail sales.

Over the past year, investors have invested money in aggregators like Thrasio and Perch, which source promising products and storefronts with the goal of using their data and operational expertise to drive sales.

Thrasio is in talks to go public with a merger with a SPAC led by former Citigroup executive Michael Klein at a valuation that could exceed $ 10 billion, Bloomberg reported in June.

In November, Pharmapacks raised more than $ 250 million from private equity firm Carlyle Group in a deal valuing the company at around $ 1.1 billion.

Under the SPAC, Packable is raising $ 180 million from investors such as Fidelity and Lugard Road Capital. Profits will be used to help Packable expand internationally and into multiple online markets, the company said in a statement.

A PSPC is a blank check company that raises funds to buy a private entity through a reverse merger and go public with the help of funding from additional investors. PSPC agreements have become an increasingly popular route to be made public over the past year.

In addition to Amazon, Pharmapacks said it also offers its products on Walmart, eBay, Kroger, Target and Facebook, as well as several direct-to-consumer sites.

Packable said in a presentation to investors that revenue this year will increase 22% to $ 456 million and that it projects average annual growth of 38% through 2024, when sales are expected to exceed $ 1.3 billion. of dollars. One of the advantages of going public through a SPAC instead of a traditional IPO is that companies can issue forward projections.

Nonetheless, Pharmapacks does not expect to generate an operating profit until 2024. Indeed, it spends around half of its income on sales and distribution and an additional 20% on warehousing and administration costs. based on 2021 estimates.

Like many e-commerce businesses, Packable has benefited from the surge in online shopping fueled by the pandemic. But its revenue growth began to slow dramatically in the first half of this year, in part due to constraints in the global supply chain, which “resulted in significant stockouts, order delays and delays in sales. onboarding new customers, ”the company said. said in the record.

Packable has listed the ongoing supply chain issues from the Covid-19 pandemic as a potential risk to his business. He also warned that a significant portion of its revenue is tied to a small number of markets and that “loss of access or a significant drop in activity levels” in those markets could harm the business.

Packable said it could be “affected by fraudulent and illegal activities of other third-party sellers and possibly by market programs designed to prevent such activity.” Amazon’s market has been plagued by persistent issues for years with counterfeits, unsafe products, and fake reviews.

– CNBC’s Ari Levy contributed to this report.

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