Pinterest IPO raises RM5.8b as it shuns social-media tag

By BLOOMBERG

SAN FRANCISCO • Pinterest Inc’s message to investors was don’t compare us to social media or a search engine. The outcome on Wednesday was that it raised about US$1.4 billion (RM5.84 billion) in an above-range initial public offering (IPO).

Pinterest operates in a crowded digital marketing space, where Google LLC and Facebook Inc get the lion’s share of ad dollars, and a smattering of smaller platforms like Twitter Inc and Snap Inc get the rest. The San Francisco-based company, which serves as a sort of digital bulletin board for pictures and ideas for furniture, fashion, weddings, recipes and more, has a direct line to millions of people who are looking for specific things to buy. That may give it an edge in making money from its user base compared to some of its peers.

CEO Ben Silbermann likes to project a more virtuistic, less competitive vision of Pinterest, but investors will still be scrutinising its advertising model. There are a lot of options to place bets on hot technology companies: Ride-hailing company Lyft Inc made its debut this month and Uber Technologies Inc is likely to list its shares in May. Videoconferencing company Zoom Video Communications Inc raised US$751 million in its IPO on Wednesday and began trading yesterday along with Pinterest.

Other high-profile companies considering going public include Slack Technologies Inc, Postmates Inc, Palantir Technologies Inc and Airbnb Inc.

Pinterest sold 75 million shares on Wednesday for US$19 each, after marketing them for US$15 to US$17, according to a statement. Based on the number of Class A and B shares outstanding after the offer, as detailed in a regulatory filing, Pinterest’s IPO price would value it at about US$10.1 billion.

Including restricted stock and options, the IPO values the San Francisco- based company at about US$12.7 billion, said a person familiar with the matter who asked not to be identified because those details weren’t public. Pinterest’s last valuation, from a private funding round in 2017, was US$12.3 billion.

The offering was led by Goldman Sachs Group Inc, JPMorgan Chase & Co and Allen & Co. Pinterest will trade on the New York Stock Exchange under the symbol PINS.

Uber Next
The listing is the second biggest in the US so far this year, after Lyft’s US$2.34 billion IPO and ahead of Tradeweb Markets Inc’s US$1.24 billion offer.

Uber will seek to raise about US$10 billion in an offering valuing it at about US$100 billion, people familiar with its plans have said.

Zoom, which boosted its share price to US$36 from an already elevated range of US$33 to US$35, is a rare example of a profitable tech start-up launching a public listing. The listing values the company at more than US$9 billion.

Pinterest has taken a slow and steady approach to growth and making money from the service, compared to the faster expansion rates of Facebook, Twitter and Snap when they went public. Analysts expect revenue will likely come more from squeezing additional ad dollars from the base of users Pinterest already has, rather than growing its total audience.

Snap Comparison
Despite Pinterest’s efforts to distance itself from the label of a “social media company”, analysts say it can be a useful benchmark for valuation. According to James Cordwell, an analyst at Atlantic Equities, Pinterest is worth as much as Snap, about US$16 billion, and could be much more.

“The ability to monetise that audience is much higher,” Cordwell said of Pinterest before the pricing. “When you’re at Snap you’re in the business of communicating with friends or wasting time; when you’re going to Pinterest there’s high purchasing intent: You’re planning something, looking for a product. That’s exactly what advertisers are looking for.”

‘Visual Discovery’
Pinterest calls itself a “visual discovery” platform for people to get ideas for different aspects of their lives, whether that’s curating a wardrobe, planning a vacation or wedding, or furnishing a new home.

It’s not like Google either. Silbermann said Pinterest users often don’t have exact words to describe what they’re searching for. For instance, if someone is looking for inspiration for home design, they may not know what to type into Google, but if they were to see images proposed to them in Pinterest, they’d be able to identify what they liked, and “pin” it to their online board of ideas.

Pinterest said in its IPO filing that it reaches more than 250 million monthly active users, two-thirds of whom are female. That includes 43% of Internet users in the US and eight out of 10 moms. Pinterest highlights that statistic as an advantage over other platforms, given that mothers are “primary decision makers when it comes to buying products and services for their household”.

Ad Opportunities
Ali Mogharabi, an analyst at Morningstar Research, said Pinterest has opportunities to increase its share of the US$500 billion global digital advertising market.

“While we don’t expect Pinterest to displace online advertising behemoths Google and Facebook or up-and-coming Amazon.com Inc we do expect it to attract a small pinch of digital ad spending,” he said. Mogharabi said he expects a 35% compound annual growth rate for Pinterest through 2023, partly driven by the digital advertising market.

In a dig to social media services, Pinterest made it clear in its video to investors that ads are a tax to the user on social media. Even if the item is relevant, people aren’t interested in seeing an ad for a pair of shoes they may have looked at casually a while back when they were trying to talk to their friends. “Pinterest should have among the most valuable ad impressions, second only to the Google search ad,” said Andrew Lipsman, an analyst at EMarketer.

International Growth
One of the primary criticisms of Pinterest is that the majority of its user growth is coming from international markets, where the average revenue per user is much lower than in the US.

In 2018, more than 80% of new users were from outside the US, however, they generated about 25 cents per person compared to US$9.04 for those based in the US.

Investors are also aware of the potential threat that Instagram poses. The company just started testing a new shopping feature that allows people to buy things they see directly through the Instagram app.

On the other hand, Pinterest may benefit from the heightened global scrutiny of Facebook, Google’s You- Tube and Twitter as those platforms struggle to remove hate speech, violent content and misinformation from their services.

“Pinterest is one of the few friendly corners of the Internet,” he said. — Bloomberg