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Toy Maker Funko Had The Worst First-Day Return For An IPO In 17 Years

Funko, the toy maker whose big-headed collectible figures can often be found decorating the offices of animation industry artists, launched a Goldman Sachs/JP Morgan/BofA Merrill Lynch-led IPO last Thursday that went about as poorly as a public offering could possibly go, with some investors labeling it “a disaster.”

In fact, Funko’s IPO offered the worst first-day return for a Wall Street IPO in 17 years, with shares dropping 41% from their initial price of $12 to close at $7.07.

Part of the reason for Funko’s dismal debut may have been lingering questions about its accounting practices, which a Bloomberg columnist called the “latest example of fun-house accounting on Wall Street.”

The company also has around $320 million in debt (as of June 30, 2017). Multiple private equity firms have volleyed ownership of the company in the last few years, and according to analyst reports, at least $100 million of cash was taken out of the company by its private equity owners. The IPO was launched in large part to help pay down the debt.

For Funko to succeed, the Everett, Washington company must convince investors of the validity of its operating principle that “almost everyone is a fan of something,” and its mission to create “products that enable fans to express their affinity for their favorite ‘something’ — whether it is a movie, tv show, video game, musician or sports team.”


Funko’s goal is to dominate the global licensed pop culture product industry, sitting within the entertainment and character products market, which generated $113 billion in total sales last year. Funko, for its part, generated $425 million in revenue in 2016, through a catalog of content licenses for over 1,000 properties, many of which are animated IPs.

Funko prides itself on its “fast fashion product development process” that allows it to quickly design, manufacture, and distribute toys to take advantage of pop culture fads. According to Funko’s IPO prospectus:

Our flexible and low-fixed cost production model enables us to go from product design of a figure to the store shelf between 110 and 200 days and can have it on the shelf in as few as 70 days, with a minimal upfront investment for most figures of $5,000 to $7,500 in tooling, molds and internal design costs. Because of the strength of our in-house creative team, we are able to move from product design to pre-selling a new product in as few as 24 hours.

Funko employs 339 people in the United States, and 126 in the U.K. (following its acquisition of London-based Underground Toys). These numbers don’t include the people who actually make the toys at third-party manufacturing vendors in countries like China, Vietnam, and Mexico.

  • AdolRed

    This is all the proof I need that there is a god

  • skent

    No schadenfreude from me. Ever-expanding capitalism never seems to realise when something has reached it’s natural limit and run its course. There is always a plan to dominate and grow the market further. I’m reminded of the Beanie Baby fad that a lot of people got drawn into. I doubt they are catering to the general public where ‘everybody is a fan of something’. I imagine a big part of it is running on the dollar of completist obsessives who get suckered into buying far more than they initially intended.

    • cartoonguy

      The completist mentality is a big part of the success of these things. I have a couple friends who spout Funko marketing terms – “oh that figure’s been vaulted, you can’t get it anymore!” – like it’s a real-world issue. Seems like the POP figures are only worth something to people collecting them… because they’re worth something…. just like Beanie Babies.

      • BrotherVoodoo

        I mean, that’s a lot of things in this world. Art that goes for millions is only worth something to people because they want it, not because its going to feed/clothe or vacuum your house.

  • Roger Lee

    The last laugh will be from the people who were smart enough to buy this stock while it was down.

  • PinataPower

    A friend of mine works at Lounge Fly, which is a design studio in Chatsworth. He said Funko acquired them earlier this year. Following this, they began laying off senior design staff.

  • Inkan1969

    Well, that puts the “funk” in Funko.

  • Businesses that run with a debt never succeeds with time, their owners always think they can out sell their stupidity. The best way to build a business is doing it debt free, then all money generated is toward proft rather than loss…seems like the people running the company were just big headed.

  • Mysterious Friend X

    Looking at the quality of these things, I have no doubt that they can have a product on the shelves in a few months, but is that something to brag about? The Japanese figure company Good Smile Company has a somewhat analogous product line called Nendoroid (small figures with oversized heads using standardized parts), which they can also produce pretty fast to suddenly capitalize on something. The difference is that they look good, and also have optional faceplates, body parts and accessories so they can be customized and posed in different ways.

    Same character by both companies:

    • anotherguy818

      Saying Nendoroids are analogous to POPs is pretty ignorant. A big part of the attraction to POPs is not only their big heads, but there big, round, undetailed eyes. Sure, you can say less detail makes it worse, but that’s an opinion; many, many people love the minimalist design, and that cuteness factor is the major appeal for many people. Also, POPs are designed specifically to be non-poseable, as not everyone enjoy’s poseable figures. You may think that is dumb at first glance, but non-poseable figures have many pros when compared to jointed/poseable figures. Poseable figures all have some kind of joints to them, which are visible and disrupt the appeal for some people (including myself). Also, many poseable figures, such as Nendoroids, have the base and support arm, as seen in your picture, which is also not attractive to some people. The interchangeable face plates have the same issue as the joints and support base/arm. Funko also makes variants of many characters, which give people the option to either get just the one they want, or get all of them, which has a similar effect to different face plates. Many people have distinct preferences on whether they like jointed figures or non-jointed/non-customizable figures. Look to the whole industry in Japan of scale figures (Good Smile Company also makes figures for this sector). Some are jointed, but a large amount (I think majority of scale figures) are non-jointed and non-customizable – these figures generally fall under the catagory of “pre-painted” scale figures, these also have a big audience, and are highly detailed and meant to be proportional and painted with incredible detail to make an accurate, scaled-down version of the character. These, in terms of design, are the opposite of POP figures, they are about as un-minimalistic as you can get, but they are the same in the way of being non-jointed and non-customizable (when I say non-customizable I mean that there aren’t things provided with the figure to alter it; that it is made in its intended form, and most people leave them unaltered – but there are many people, notably in the POP community, that customize POPs either with paint or with sculpting as well to make different variations of a character, or a new character entirely). People have different views in terms of what appeals to them, and many people love the design of POP figures, even if some people don’t see the appeal, but that is how it is with anything, for example, I don’t care much for old, high-end art (old/famous paintings, etc.), it doesn’t appeal to me at all, so I would never buy it, but other people do like it – I can’t say that a commissioned picture of a gaming character is objectively better than the painting that a person likes, as they have completely different styles, so it is simply based on individual preference. In the same sense, POPs and Nendoroids are different styles and appeal to different people (I also know many people collect both POPs AND Nendoroids [along with other figures, such as Figma, etc.]).

      Nendoroids also cost like 5x than POPs, making them much pricier, which isn’t affordable for many people. Another thing that separates POPs from other figures such as Nendoroids, is that Funko has an incredible pool of licences, reaching far beyond what other figure companies have, and with licenses in genres that other companies don’t even touch (Musicians, Ad Icons, Athletes; all of which Nendoroid doesn’t involve itself with, being focussed largely on anime franchises and some games, both of which Funko also produces figures for). Funko even just recently released an exclusive figure of James Gunn, the director of Guardians of the Galaxy. Nendoroids simply don’t reach certain audiences with some of it’s franchises, but that’s okay, as it has it’s own audience for the most part.

      Overall, I don’t think Funko is going to fail, I imagine they will be fine, the community only continues to grow (and I hope they can stick around long enough to make some series that I’m still hoping for XD *cough* SMITE *cough*).

      • Mysterious Friend X

        I said they are somewhat analogous.

        I have 50 or so Japanese figures on display right now and many more in boxes, so I know all about them (and I no longer buy nendoroid or figma as I prefer scale figures). It’s not an issue that POPs cannot be posed or that they don’t have swappable parts, it’s just that they are so utterly cheap-looking, uninteresting and same-looking, and it’s supposed to be some big deal that Funko can produce a new one so quickly. It’s also a sad state of affairs that this is apparently the most popular figure line and figure manufacturer in the US.

      • Robek World

        Stealing this for pasta

    • rezzyk

      I have probably close to 100 Pops and got my first Nendoroid with the Breath of the Wild Link (Deluxe) and… I prefer Pops. They are almost the same size (Pops might even be a little bigger), and cost 5 times LESS than a Nendoroid. I also actually do not like the ability to swap out pieces, especially because they are all tiny, and extras need to be stored somewhere when not in use.

      Are Nendoroids more detailed than Pops? Sure. But they also cost 5x as much. It’s not a direct comparison at all.

      • The only reason people assume Nendoroids are more expensive than POPs is because importing them costs more than the sticker price on the box. When adjusted for exchange rate, they’re nearly identical in terms of cost to consumers.

      • Mysterious Friend X

        Scale figures are even more expensive than nendoroids. I still buy them instead of nendoroids, and I’ll pass on cheap ones if I don’t like them, even if it’s a favorite character. If you are choosing figures based on price, then I have to wonder why you are even buying them at all (unless you are really short on money).

    • Capital_7

      Not sure you understand what makes a part “standardized”, really.

      • Mysterious Friend X

        How so?

        • Capital_7

          These are not made from standardized parts. They’re stylized, but not standardized.

          • Mysterious Friend X

            They seem to use generic heads, and may have generic bodies that are modified as needed.

    • James Snelgrove

      Nendoroid wins hands down.

    • Liam

      Pops: $10.
      Nendoroids (at least the Link one I got at Target): $60.
      Not the same market AT ALL.

      • Mysterious Friend X

        There is a price difference, but as I said to someone else, if you are buying figures just based on price then what is even the point anymore (unless you have very little money to spare and want to have at least something)?

  • Capital_7

    They’ve flooded the market with overpriced modern Beanie Babies. Then they built a huge flagship store and office complex full of expensive, enormous versions of their toys as decorations. This reminds me of the dot com rush, where people were asked to take pay cuts while the offices were decorated with expensive neon antiques and high end, futuristic furniture and whatnot. Ultimately, these are businesses that become successful by accident, which is not a model for sustainable growth.

    Further: they began to lean into the blind box toys, which are the 8 to 12 dollar equi9valent of the random toys that come out of gumball machines. You’re expected to keep buying, keep spending and keep getting toys you don’t want until you get that single character you’re searching for. That’s a fcked business model if there ever was one.

    Even further: they’ve thrown in with so many companies to make hard to find, elusive exclusives that their Facebook page comments are full of angry fans who are frustrated and often quitting collecting because they can’t get the exclusives that are offered. This is a clueless company, deserving of the hard times ahead.

  • Roca

    Company is a one-trick pony with specialized product that isn’t for everyone. I don’t see it working long term unless they start making something besides these vinyl bobbleheaded things.