Upwork IPO: Freelancing platform soars on first trading day

Upwork, a gig economy platform that matches companies with contractors, started its first day as a public company Wednesday, opening nearly 50 percent above its offering price.

Shares of Upwork, listed on the Nasdaq under the ticker UPWK, opened at $23, significantly higher than the $15 at which they were priced. They closed at $21.18. The IPO raised $102 million for the company, which has been operating under its current name since 2015 after combining two older platforms, oDesk and Elance.

"The goal here was not to raise a lot of money, it was to get out there and show ourselves as the largest global online marketplace for freelancers," said Upwork CEO Stephane Kasriel.

Upwork, the largest of the gig platforms, matches businesses with individual contractors to complete short-term projects. It competes with sites like TaskRabbit, Fiverr and even Craigslist, but is seen as a more professional-oriented platform, where workers are vetted and their skills are certified. That's made it a target of complaints among some freelancers who are either unable to get significant work or are barred from the platform outright for reasons they don't understand.

Upwork only admits about 2 percent of the freelancers who sign up to use the platform, Kasriel said, explaining that admission was largely dependent on having enough businesses offering jobs for a given skill set.

"If we let in too many people, you will have a lot of people bidding on the same work, which means the price tends to go down, and the best people leave," he said. 

"The Upwork IPO is a sign of interest and a vote of confidence in the world of contingent work," said Barry Asin, president of Staffing Industry Analysts, an independent research company.   

The company has about 375,000 freelancers on the platform last year who performed $1.56 billion worth of work, it said in filings with the Securities and Exchange Commission. However, it hasn't yet made a profit, losing $3.1 million on $202.5 million in revenue in 2017, according to filings.

Upwork makes money by taking a percentage of the rate that its customer companies pay contractors, using a sliding scale that encourages high volume. (Of the first $500 someone makes on the platform, nearly a quarter goes to Upwork's fees; that portion drops to 10 percent and then 5 percent as the volume of work increases.) The company has been pushing into enterprise services, aiming to provide staffing, payment and other services to large, recurring corporate clients.

The big question in this model is how long Upwork can keep growing its freelance pool now that some states and cities have begun to reject the gig worker model. Uber, another massive gig platform, recently emerged victorious from an attempt by California to classify its drivers as employees, not contractors. Earlier this summer, New York determined that Uber drivers were employees who could collect unemployment benefits. 

If it turns out that large numbers of freelancers are actually classified as employees, the companies that hired them could find themselves owing millions of dollars in back taxes, Social Security and Medicare payments, and Upwork could find it doesn't have much of a business model.

In addition, recent government data seem to suggest the gig economy is much smaller than has been widely reported. Just 7 percent of workers are independent contractors, the Labor Department reported this summer, and only 1 percent of the workforce uses a digital platform to look for work. 

Upwork's IPO comes at at time of historically low unemployment when workers find themselves being able to ask a little more of their employers. It's uncertain, in these circumstances, how much cost savings the company can really offer its corporate clients.

"The majority of workers prefer a full-time job," said SIA's Asin. "At least in a full-employment economy, companies are going to hire people the way they want to work."