Hepsiburada faces delisting threat (NASDAQ:HEPS)

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D-Market (HEPS), known as Hepsiburada, has been struggling since its IPO in July 2021. After the successful IPO and a month of trading above the listing price, the stock began its fall . Despite management’s prior promises, the Turkish e-commerce giant’s financial headwinds Carry on.

Currently, the stock is trading around $0.71, which is considerably lower than its IPO price of $12.00. Hepsiburada had received a NASDAQ opinion because the current share price does not meet the exchange’s minimum bid requirement. Although management says the outlook is positive, last quarter’s financial results and Turkey’s worrying macroeconomic outlook tell a different story.

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Finances are worse than they look

Hepsiburada continued to perform poorly in the final quarter. After a first look at the Q2 report, we can say that the company had a bit of a difficult quarter. However, it is far from complete; To understand Hepsiburada’s finances, we need to look at its reporting methodology. Hepsiburada is a Turkish company declaring in Turkish liras (one of the most inflationary currencies in the last five years).

Under IAS-29 regulations, Hepsiburada adjusts its financial statements with the official inflation rate. The inflation rate that Turkish National Statistics Agency (TurkStat) decides. However, TurkStat is a public institution; which lost its reputation and reliability under Erdoğan’s rule. Thus, the private sector, investors and financial authorities outside the public sector often question the official inflation figures.

For the second quarter of Hepsiburada, the official inflation adjustment rate was 1.79, which represents inflation of 79%. Even though inflation rates are difficult to estimate, calculations made by independent parties can give us an idea. The Inflation Research Group says that real inflation is more than double the stated rate of inflation and is close to 180%. Afterwards, we would have a radically different financial report if we were to adjust the figures with the unofficial inflation estimates, even with a more conservative figure like 120%.

Despite its best efforts, Hepsiburada continues to burn cash while struggling to generate growth. They face a drop in GMV and revenue. It is also alarming to see that the number of orders and active customers has decreased every quarter. Additionally, quarter-over-year growth in orders and active customers was limited. Stunting is a worrying issue in a rapidly growing market like Turkey, given that Hepsiburada has spent a fortune to increase those numbers.

Hepsiburada quarterly report

Q2 Report (Hepsiburada quarterly report)

The competition is fierce

Although management hasn’t done a great job, the Turkish e-commerce market is very competitive. Trendyol (owned by Alibaba) and Amazon are growing aggressively. Hepsiburada’s competitors have superior resources and the luxury of operating at a loss for a long time. Therefore, protecting its market share has not been an easy fight for Hepsiburada. They had to overspend on advertising and marketing while running aggressive campaigns and discounts to retain customers.

While we’ll have to wait to see the impact of the upcoming e-commerce law, it has the potential to chill aggressive marketing and customer discounts in e-commerce. The new regulations will potentially benefit Hepsiburada the most, as they are at a disadvantage to Trendyol and Amazon.

Quarterly presentation of Hepsiburada

New e-commerce law (Hepsiburada quarterly report)

Hepsiburada’s new ventures are not promising

Overall, Hepsiburada has failed to create a new business channel that promises opportunities for monetization and expansion. I believe these new business ventures are not bright enough to change the outlook anytime soon.

Hepsiburada quarterly report

New companies (Hepsiburada quarterly report)

HepsiAd & HepsiGlobal

HepsiAd is their online advertising solution targeting SMEs on their platform, while HepsiGlobal is their initiative to add global merchants to their marketplace to increase their offerings in Turkey. While both are successful initiatives, they are not new monetization channels. These are just efforts to support their core business and face competition from Trendyol and Amazon.

On demand

On-Demand is an adjacent area that Hepsiburada could expand and utilize its customer traffic. Yet the Turkish market is fiercely competitive. Getir, Yemeksepeti (Delivery Hero) and Tredyol have already consolidated the market. Therefore, I don’t think demand on demand is an opportunity for Hepsiburada. I believe management’s choice to present the “Perfect Order Ratio” as an “additional measure of monetization and growth” tells the whole story.

Plane tickets

Hepsiburada’s airline ticketing business is in its infancy, with 37,000 tickets sold despite having 11.7 million active users during the quarter. I think it will be another cost driver for the company rather than a strategic asset.

Macro issues continue

The surge in inflation has slowed with the stabilization of the Turkish lira over the past two months. Yet there have been no changes in unorthodox policies or improvements in Turkey’s economic fundamentals. Most analysts expect Erdoğan will raise the minimum wage sharply and increase spending ahead of the next crucial election. I believe fiscal expansion will inevitably push inflation up. In my opinion, it would be naïve to expect economic stability as political elections approach and the Erdoğan government is determined to win.


Overall, Hepsiburada has been a disappointment for its investors so far. Management promises profitability in the hope that new regulations and cost reduction may be the path to achieving its goals. However, the financial statements for the last quarter were troubling, and if we take a higher inflation adjustment multiple instead of the official multiple, it turns into a financial nightmare. On the other hand, new business ventures are not enough to turn the tide for the company. Last but not least, economic and political instabilities in Turkey carry significant risks for struggling Hepsiburada.

Key takeaway for investors

While the current situation is worrisome, I refrain from giving it a sell rating as the stock is already heavily beaten and trading around 0.1x EV/GMV and 0.25x EV/Revenue multiples. The company still has the opportunity to deliver shareholder value with the management change and restructuring as it has an active user base, but it’s not worth taking the risk as long as it there are no concrete measures.

About Louis Miller

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