Fashion resale marketplace ThredUp has divested its European business to focus on its core domestic US market. The company has sold its European operations, Remix, to its management team led by Florin Filote, who was appointed as the general manager of Remix in May.

ThredUp expanded into Europe in 2021 with the acquisition of Remix, a Bulgarian startup operating in central and eastern European markets. However, the company's European revenue has been struggling, dropping 18% year-on-year to $13 million, while its gross profit fell 25% to $3.6 million. This decline in revenue and profit led ThredUp to explore a sale of Remix, as confirmed in its Q2 2024 earnings in August.

At its Q3 earnings last month, ThredUp announced that it had signed a non-binding agreement with Remix management for a buyout. The deal has now been finalized, with Filote paying just €1 (one euro) for 91% of the common stock in a new entity called Remix US Holdings. ThredUp has also made a "final cash investment" of $2 million into Remix to support its initial period as an independent entity.

While the purchase price may seem low, there is a catch. In addition to the 9% stake retained by ThredUp, Remix has issued ThredUp a convertible promissory note for €61.6 million ($64.7 million) plus interest, which represents the investment ThredUp had made in Remix since its acquisition three years ago. This debt element becomes repayable in 2034, or when a liquidity event occurs before then, such as an acquisition, IPO, or some other third-party investment.

The divestiture of Remix is seen as a mutually beneficial outcome for both ThredUp and Remix. ThredUp co-founder and CEO James Reinhart stated, "We are confident that Remix will thrive under Florin Filote's leadership and the team's expertise. This transaction will allow ThredUp to focus on our core U.S. business and continue to innovate and evolve our marketplace."

ThredUp's decision to divest its European business comes as the company has been struggling to maintain its market value. Founded in 2009, ThredUp specializes in secondhand clothing and accessories and went on to raise over $300 million ahead of its 2021 IPO. However, its market cap has dropped significantly from a $1.3 billion valuation at its IPO to a low of just $60 million last month. The company's shares have since soared to nearly $200 million following its better-than-expected Q3 earnings and guidance.

The divestiture of Remix is expected to have a positive impact on ThredUp's financial performance, allowing the company to focus on its core US business and drive growth in the domestic market. The deal also marks a new chapter for Remix, which will now operate independently under Filote's leadership.

The transaction highlights the challenges faced by startups that went public during the 2021 IPO boom, many of which have struggled to maintain their market value. ThredUp's decision to divest its European business and focus on its core US market is seen as a strategic move to drive growth and improve its financial performance.