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Pattern Group (NASDAQ: PTRN — $2.71 billion) claims to “accelerate brands on global ecommerce marketplaces by leveraging proprietary technology and AI.” The company boasts “46 trillion data points comprised of keyword, shipping, advertising, sales, market share, click, social, conversion, customer service and other data” as a key driver of its success. As a data-centric and AI-powered platform, investors hope Pattern can serve as a powerful partner for brands to grow their ecommerce footprints.
In reality, The Bear Cave believes Pattern is an overhyped third-party seller of health supplements and other consumer goods on Amazon. Pattern convinces brands that its data and expertise allow it to sell on Amazon more effectively than the brands themselves, enabling Pattern to buy from brands at wholesale prices and resell at higher retail prices. It is a business model that is difficult to scale, with thin margins, low barriers to entry, and a history of mixed success. The Bear Cave concludes Pattern’s multi-billion-dollar valuation is based more on hype than substance and that its leadership is more bark than bite.
On its IPO day, Pattern Group CEO and co-founder David Wright sat down for an interview with CNBC’s Andrew Ross Sorkin, who asked a simple question:
“For those who don’t understand or know this business, what is it exactly that you do?” (0:50)
Mr. Wright responded, in full,
“Tech, AI-enabled, helping brands across marketplaces globally, we connect 61 marketplaces, 20+ offices around the world.” (0:58)
Andrew Ross Sorkin followed up:
“And when people think about investing in this company today, what is the comparable? When the bankers sat with you and put their presentation together, what were the quote unquote ‘comps’ for this?” (1:07)
Mr. Wright responded,
“Well, the thing that came up the most was they were like ‘you don’t really have a great comp in the market’ because we are technology-enabled, AI-enabled, e-com, so great space all around. But yet the way we monetize it is we move inventory. So, it caused a lot of head scratching. It’s a great space, a great way to monetize. Very sticky.” (1:20)
The interview’s top comment states:
“I would never invest in a company whose CEO can’t even explain to a common man what their business does. He just threw some business jargons, included AI and tech and ecommerce without actually telling how their business operates.”