Elliott, one of the world's most prominent investors, has a 13% economic stake, including both common shares and swaps, a person familiar with the matter said, declining to be named because the discussions are private. That makes Elliott the biggest investor in Etsy.

Etsy shares, which have tumbled from their 2021 high of $294, traded up 10% early on Thursday to exchange hands at $73.08 per share.

Elliott portfolio manager Marc Steinberg, who specializes in technology, media and telecommunications investments at the company, will join the Etsy board on Feb. 5. With Steinberg, the board now has 10 members, nine of whom are independent.

"We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation," Steinberg said in a statement.

Elliott declined to comment beyond the statement and Etsy did not immediately respond to Reuters' requests for comment.

Steinberg joined the board of image sharing and social media service company Pinterest in December 2022. The stock price of the company has surged 100% since Elliott invested in July 2022.

Negotiations between Etsy and Elliott were described as cooperative and the hedge fund did not enter into any arrangement or understanding with Etsy that would require a regulatory filing to be made, the person said.

(Reporting by Savyata Mishra in Bengaluru; Svea Herbst-Bayliss in Boston; Editing by Maju Samuel and Emelia Sithole-Matarise)