Pinterest stock is soaring (after a brief halt) following a very much unexpected Bloomberg report that PayPal is exploring an acquisition of the social media company citing people with knowledge of the matter said.
The San Jose-based PayPal has recently approached Pinterest about a potential deal, which contemplates a potential price of around $70 a share, which would value Pinterest at roughly $39 billion. A deal at that level would represent about a 26% premium to Pinterest’s Tuesday closing price of $55.58, a price which has since spiked to $62 following the report. Shares of Pinterest have fallen 16% this year, giving it a market value of about $36 billion. Pinterest went public in an April 2019 initial public offering valuing the company at just over $10 billion.
The rationale behind the deal seems to revolve around a fully-integrated e-commerce platform: a boom in online shopping has helped PayPal stock more than double since the start of last year, giving the company a market capitalization of nearly $320 billion. Those gains give it a strong currency it could use for acquisitions.
As Bloomberg notes, PayPal’s interest comes at a complicated time for Pinterest. The social media company announced this month that co-founder Evan Sharp, who oversaw its design and product teams, is stepping down. It’s also been dealing with a number of accusations from former employees that Pinterest discriminated against female workers.
In July, Pinterest reported monthly active users for the second quarter that missed the average analyst estimate and said it had a lack of visibility on key engagement drivers going forward. As of Q2 2021, Pinterest had some 454 million monthly active users, a drop from a record 478 million the previous quarter. It's unclear what the real number of MAUs is when excluding the customary click farms operating out of India and Bangladesh.
While the proposed deal certainly comes out of left field, it would be in keeping with PayPal’s increase appetite for acquisitions in the past few years when it snapped up competitors and moved into new markets. It purchased European small-business commerce platform iZettle in 2018 as part of a bid to better challenge Square Inc.
The next year, PayPal bought price-comparison app Honey Science Corp. for $4 billion, gaining access to valuable data on consumer buying habits through its largest-ever deal. The company agreed in September to acquire Japanese startup Paidy Inc. for 300 billion yen ($2.6 billion) to deepen its push into “buy now, pay later” offerings.
The article notes the customary disclaimers that "terms of a transaction could still change, and there’s no certainty the talks will lead to an agreement, the people said."
In sympathy with PINS, Twitter stock rose to a session high of 2.9%, while Snap briefly erased earlier losses. Meanwhile, Paypal stock is not too happy.