Dive Brief:
- ContextLogic, which does business as Wish, has agreed to sell the online marketplace for about $173 million in cash to Singapore-based Qoo10, which operates localized marketplaces in Asia.
- The agreement was forged after “a thorough review of strategic alternatives with the assistance of outside financial and legal advisors,” according to a statement from ContextLogic Board Chairman Tanzeen Syed.
- The deal still needs ContextLogic shareholder approval, but is not subject to any financing contingency and is expected to close during the second quarter, according to a ContextLogic press release. ContextLogic itself will remain a public company.
Dive Insight:
ContextLogic revealed in November that it was exploring strategic alternatives, amid ongoing revenue declines and losses. Wish has been up against major rivals, including Temu, its much faster-growing key competitor, and Shein, which has “a similar focus on value-oriented consumers,” according to a November research note from UBS analysts led by Kunal Madhukar.
Last year, the company resorted to layoffs of more than 250 employees, affecting 41% of its U.S. workforce and 26% of its international workforce. That followed an attempt the year before to rebrand, a few months after former Foot Locker executive Vijay Talwar’s arrival as CEO. Talwar left after just seven months in the job, and Joe Yan, an operating partner at venture capital firm GGV Capital, took over.
Before the agreement announced this week, the board had considered various options, including “standalone prospects of the business under various scenarios,” and “reached out to nearly 40 potential parties,” Rishi Bajaj, appointed lead independent director of ContextLogic’s board in November, said on a call with analysts this week. The company said that the selling price of about $6.50 per share reflects a 44% premium to ContextLogic’s closing stock price on Feb. 9. The company’s debuted on the stock market priced at $24 per share, and raised $1.1 billion.
Shareholders may need to be patient, however, as the company said it is working to monetize its net operating losses, which can be leveraged as tax shields. Wish has about $2.7 billion of NOL carryforwards and certain retained assets, per this week’s release. As of the end of 2022, that included $886 million that begin to expire in 2030 and continue to expire through 2037, and $1.7 billion that have an unlimited carryover period, according to its most recent annual report.
“If the ContextLogic Board does not identify opportunities that will allow it to effectively monetize the value of its NOLs to the benefit of shareholders, it intends to promptly return all capital to shareholders,” the company said.
