SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among two-way apparel marketplaces. We look at why they are compelling and why each could be a fit for a blank-check merger.

SPACs have dealt over the past year with both fervent fans and just as fervent detractors, each of which have posed their own destabilizing effects on the asset class. In that way, they are like some of the newly mainstreamed investment types that certainly would not have been considered traditional assets in any form in the past.

When it comes to high fashion and coveted sneakers, manufactured scarcity has long been a part of the game that brands use to drive up prices. But, instead of long lines at retail stores for the latest Air Jordans, the internet is now vacuuming up a large portion of limited stock, and making it all available online, for a price.

The internet in general has made it possible for collectors of all kinds to present enough volume in one place to generate genuinely dynamic market pricing for consumer items. And, two-sided marketplaces are allowing individual consumers jump in and arbitrage rising and falling demand tides just like manufacturers as well.

Ebay (NASDAQ:EBAY) and Craigslist may have started this movement, but the reselling market has just recently hit overdrive in apparel with business models that do not resemble the internet garage sale of the platforms of yore. Secondhand apparel sales hit $28 billion in 2020, and they are further projected to balloon to $64 billion by 2024, according to GlobalData. Already last year, the secondhand apparel market grew 25x faster than the overall retail market.

Much of this gain in the secondhand market has been a direct result of scooping up inefficiencies in retail. As retail stores across the country were forced to temporarily shutter through the pandemic, many were happy to offload inventory in bulk to enterprising resellers, like the 19-year-old profiled by Bloomberg turning over $200,000 worth of shoes a month.

Not all of these retail strains will remain as the pandemic wanes. But, now that the reselling market has gained in sophistication, there are sure to always be retail stores looking to move excess inventory and hobby collector-investors looking to buy low.

And, while we’re not quite to the point of maturity for SPACs to be merging with shoe portfolios in the way we have seen in the music sector, the platforms that are hosting all of this growing commerce are looking more attractive by the day.

StockX

The platform in particular that helped that 19-year-old to build a small empire out of a Eugene, Oregon warehouse is StockX.

StockX has zoomed up from its 2015 founding to a $3.74 billion valuation secured in April. This came in the form of a Series E extension that drew in prominent SPAC-backers Altimeter Capital, Dragoneer and Tiger Global. The “why” is not difficult to understand, given what StockX has managed to create, which is the equivalent of an art dealer’s service amid a fast-moving two-way ecommerce platform.

Before executing sales, all items posted by StockX sellers are sent to one of 14 company locations where they are inspected for authenticity before being passed on to end buyers. Items with damaged packaging will be automatically returned at the seller’s cost with additional fees if items are found to be inauthentic.

This market credibility has also led to stability for both ends of transactions and StockX has steadily expanded into new categories such as streetwear, designer handbags, watches and gaming consoles. As of late July, StockX had amassed 6.5 million lifetime buyers and 1 million lifetime sellers while seeing gross merchandise volume on the platform expand year-on-year by 250%.

StockX’s existing investors are sure to have the company on the radar of their own SPAC vehicles, but the company clearly appreciates the benefits of an open-bidding scenario, and could opt to follow its business model by going to the highest hand raised.

Grailed

Just as Reddit has revolutionized financial trading lingo (for better or worse), so too has the rapidly advancing reselling world altered its slice of the economy. In this world, a “grail” is an item that is met with fierce demand allowing for exponential returns.

As such, one can only aspire to be a member of Grailed, where fashion bargain-hunters can quest for items with the platform putting its own discount and staff-pick influences on commerce. Beyond secondhand branded goods, Grailed allows users to monetize vintage goods in an up-filtered thrift store fashion.

Thrift store-hunting is another long-held pastime undergoing a major evolution through the younger generations. As with classic-car collecting, younger generations are looking at more recent “classics” like vintage Levi’s products and an entire genre of influencer content has sprouted up around thrift store finds and looks. For Gen Z, this only accelerated during the pandemic when socially-distanced young people had little else to do with their time other than update their wardrobes and tell the interwebs about it.

For Grailed, whose offerings focus on a range of streetwear, near-term vintage and avant-garde items, the company is following a path that has a string of successful precursors. Some of the largest reselling fashion marketplaces are recently-listed entities such as RealReal (NASDAQ:REAL), which IPO’d in 2019 as well as ThredUp (NASDAQ:TDUP) and Poshmark (NASDAQ:POSH), which each listed in early 2021.

RealReal has had a volatile public life, IPO’ing at $20 and hitting highs of $28.56 and lows of $5.75 over the past two years. ThredUp’s campaign has gone similarly, soaring from a $14 IPO price to $31.40 and then sliding to $14.98 and finding a Thursday close at $22.70. Poshmark has faired less well, IPO’ing at $42 in January and gradually sinking to a Thursday close at $26.29.

De-SPACs have been undergoing troubled trading times as well over the past few months, but each of these IPO examples present instances where structures like earnouts and lockups by most parties could ease at least some of the listing uncertainty.

GOAT

If StockX is running an auction on itself, there is always going to be alternative asset in the form of GOAT. It has established a similar structure with a greater emphasis on high-end buyers as a clientele.

GOAT remains laser-focused on shoes and streetwear, which could be either a benefit or burden in its competition with StockX, but it has a consistent ace in the hole owning Fight Club, one of the most well-known consignment shops for these sorts of goods.

It also raised $195 million in a June funding round that puts it on a similar valuation ground as StockX at $3.7 billion. GOAT was advised in these efforts by SPAC enthusiasts T. Rowe Price and Franklin Templeton meaning the communication channels are open between both sides.

But, Fight Club was forced to reduce fees last year amid the competition in a move that could be seen either as a company maturing into its place in the market or a concession to StockX’s platform. GOAT does not have the same physical platform for authentication and does it instead digitally with machine-learning tools which could in theory end up being the most efficient process.