What Can Upwork IPO Learn From Freelancer.com’s Stock Roller-Coaster?

Back in 2013, Freelancer.com made the news. The freelance platform with arguably the highest number of users in the world commenced trading on the Australian Stock Exchange. Freelancer opened an impressive $2.5, which was five times the initial offer price of $0.5. The market capitalization was estimated at almost $1 billion.

The Silicon Valley tech-wet-dream at its finest, isn’t it?

So, What Happened Five Years Later?

It seems that the number five has become the nightmare number for Freelancer. Five years later they are right where they were in 2013, at the initial price of $0.5. At one point, Freelancer’s shares hit the rock bottom with the price of just 46 cents. Remember the initial optimistic market capitalization estimates? In five years the company’s value collapsed from $1B to $200M, give it or take. That’s five times less for both Freelancer’s shares and company price.

What happened? What went wrong? Obviously, the market itself has spoken. The things were set in the right perspective.

Freelancing is an extremely expensive sport. Of course, if you want to run a freelance platform and not just to hire freelancers or work as one.

You can lie to yourself and the whole world. You can try to impress the press and your users with the shiny percentages. However, the investors and stocks can smell a trouble miles away. If a freelance platform's conversion rate is running low, meaning the ratio of projects posted and completed isn't as you hoped it would be, then the stocks won't keep their mouth shut.

No Growth – No Trust

So, who’s buying Freelancer’s shares these days? Well, that’s something you can easily check. Its founders and top management just can’t have enough of it. They still believe in their company. That’s the good news. The bad news is that you will have problems finding an analyst or broker who still recommends his clients to buy these stocks.

What’s happening with the investors who paid the opening price of $2.5? Are they waiting for the better times? If you have a closer look at the Bloomberg’s five-year report, you realize that the things for Freelancer weren’t that bad in 2016. However, if one year in Freelancer’s time means $0.5 for your stocks price increase then you will have to be patient.

Source: FLN:ASE Stock Quote - Freelancer Ltd - Bloomberg Markets

What Goes Up – Must Go Public

The time has come for Upwork to go public. Why? Why now?

When a company decides to go public, the primary and most obvious reason is to get cash, lots of cash. It all begins with the champagne, the sound of the bell, and smiling faces. You may throw in the balloons and confetti, as well.

If you are private that’s doing just fine, you can postpone the IPO thoughts for as long as you like. Even if you are going through some tough time and experiencing the financial drought, you can still avoid the public waters.

This may come as a surprise, but you don’t need millions of users for your freelance platform to be successful. If you can manage to find and keep thousands of employers and freelancers who are spending and earning tens or even better hundreds of thousands of dollars, you can sing Kumbaya. Unfortunately, the freelance reality is quite the opposite one. You end up with millions of users who are throwing the Benjamins around in the best case scenario.

The next thing you know, you are facing a maintenance nightmare. That’s exactly what happened to Freelancer and what’s happening to Upwork right now. For what is worth, Upwork already applied some preventive measures. In an effective, but not so pleasant way, they wanted to make sure that freelancers who’re earning less than $500 are no longer the most desirable type of users. You are free to stay and work, but you have to pay the highest fee in the industry – 20%. Then, Upwork tried to limit the number of freelancers by introducing the extremely restrictive application and verification policy. Obviously, none of these measures worked.

The moment of truth for Upwork has arrived. It's very hard to ensure that your revenues follow your costs when running a freelance marketplace of this size.

Upwork 2023

What’s going to happen to Upwork five years from now after the IPO? Is this platform going to suffer Freelancer’s fate?

You don’t have to be a Wall Street guru to know that the initial enthusiasm is going to be overwhelming. Who wouldn’t want to buy the stocks of the most popular and successful freelance website? Upwork is still the private company, so we don't have reliable information. However, there's this magic combination of words again. A billion dollars worth company. In theory, this estimate should be right. You have millions of users and projects. Just do some simple math. Hundreds of millions of dollars are circulating on major freelance platforms every single year.

The bitter freelance business reality that takes the costs into consideration quickly proves you totally wrong. So, what are you supposed to do? To buy or not buy?

You can’t treat Upwork’s stocks as Apple’s ones, can you? Upwork can’t give you new improved models every year. So, you will have to squeeze the money out of Upwork elsewhere.

Upworkers Will Eventually Have to Pay the Price

When you are an employer on a freelance platform, you are always privileged. If you don’t like something, you will move on and find another place to find freelancers. However, the freelancers don’t have this luxury. They can’t take their reviews and working history with them.

If you thought that Upwork’s fees couldn’t go any higher better think again. And, if you are an impatient investor, it’s advisable to hold your horses for some time. The initial price is going to be overblown. How far will Upwork stocks plunge in the years to come is left to be seen? Freelancer lost five times the value in five years. Can Upwork IPO set a new inglorious record?