The Redbubble Ltd (ASX: RBL) share price has been under pressure for over a month now. The latest bout of pessimism began for the global online marketplace operator following its first-quarter trading update on 14 October. Since then, shares have diminished in value by nearly 24%.
On top of this, the company is partly shrouded in concerns of copyright infringement allegations. Despite the decline in October and the ongoing litigation concerns, one fund manager finds Redbubble 'compelling'.
Image Source: Getty Images
Addressing the copyright risk to Redbubble on the ASX
You might have noticed that Redubble is commonly featured in the 10 most shorted ASX shares. For instance, this week the company slotted in at the number three spot with 10.5% of short interest. Yet, EGP Capital — in a contrarian manner — remains a major advocate for the eCommerce giant's potential.
In the fund manager's October report, chief investment officer (CIO) Tony Hansen summarised the fund's perspective on Redbubble. This included an admission of the negative growth for the eCommerce company in the June to September quarter compared to the prior corresponding period.
However, Hansen noted that this should be expected given the comparatively booming period last year. Instead, the CIO suggests that long-term investors look at the company's gross transaction value (GTV) from 2016 to the present. This shows a marketplace that has grown GTV from $36.6 million to $142 million in the space of five years.
In addition, the fund manager addresses the copyright concerns ASX-listed Redbubble has been facing. While it remains a risk, Hansen explained that Redbubble has repeatedly outlined the protections for designs such as fan art. Furthermore, the company has stated that it has a good working relationship with the likes of Netflix Inc (NASDAQ: NFLX).
Discussing the potential legal risk for Redbubble, Tony Hansen wrote:
Rights ownership is clearly an enormous business risk to RBL, and in simple terms, with nearly 800,000 selling artists regularly uploading new work, there will inevitably be breaches happening every day. RBL will be able to defend such breaches provided they have robust systems in place to prevent breaching materials getting onto the site in the first place, and that swiftly remove offending images/artworks when they are reported in the event they are somehow missed at the time of uploading.
Skin in the game
Tony Hansen backs up the belief in ASX-listed Redbubble with capital. At the end of October, the EGP Concentrated Value Fund held Redbubble as its sixth-largest position. The fund has a 5.2% weighting towards the eCommerce company.
For reference, the only companies with a larger weight in the EGP Capital fund are:
- United Overseas Australia Limited (ASX: UOS)
- Cettire Ltd (ASX: CTT)
- PPK Group Limited (ASX: PPK)
- Li-S Energy Ltd (ASX: LIS); and
- Smartpay Holdings Ltd (ASX: SMP)
Unfortunately for the fund, Redbubble has fallen ~42% on the ASX since the beginning of 2021.
