Should you invest in Wish? An S-1 Analysis

A couple weeks ago, Wish.com filed their Form S-1 with the SEC (under their corporate name ContextLogic). Wish has raised over $1.6 billion and was last valued at $11.2 billion in August 2019. The IPO should be a jolly moment, right? Maybe not. 

The future doesn’t look great. Wish has rising customer acquisition costs. Their gross profitability is falling because a government subsidy on shipping is disappearing. It’s also not totally clear that a lot of people actually like their product. 

It’s like Wish is running a government-subsidized non-profit dedicated to the noble cause of learning the most effective growth hacks on Facebook Ads. Instead of trading their stock, I might suggest reaching out to members of their marketing team and paying them lots of money to come work for you. 

This isn’t actual investment (or hiring) advice, do your own research please don’t sue me thanks. 

Alright, enough with the jokes and onto the analysis. 

What is Wish?

Wish was founded in 2010 as a mobile-first discount commerce app. It works like this: first, a customer downloads the app (90%+ of user activity and purchases happen on mobile). Then, they scroll through photos of items. Wish sells everything from Bluetooth headphones to baking sheets to swimsuits. Most of the prices are 80 to 90 percent off of their original price, so it seems like you're getting a steep discount. 

The key to their model is that customers trade price for convenience. When you place an order on Wish, it takes two to four weeks to arrive. On the backend, Wish places the order with manufacturers in Asia for a steep discount and sends it to you. While many discount retailers have to hold inventory in the U.S. (near their customers), without that cost, Wish can offer the lowest prices.