Pinterest In Final Stages of IPO Process
Pinterest, the online image curation company founded in San Francisco by Ben Silbermann and Evan Sharp, is reaching the final stages of its projected $1.2 billion IPO. Pinterest was created in 2010 as a social network for people to discover new interests by ‘pinning’ different images or videos to boards, allowing users to aggregate relevant feeds for their interests. Pinterest’s platform has surpassed 250 million monthly active users, allowing the company to generate over $700 million in revenue last year. These figures situate the company near Snapchat’s 287 million monthly active users, a company that had its IPO in mid-2017.
The Pinterest IPO is set to release 75 million shares at a price between $15 and $17 to put its valuation around $11.3 billion, which is a lower valuation than two years ago when it was raising funding from investors. A down round, especially in an IPO, is typically seen as a bad omen for existing investors and potential investors alike because it likely indicates that growth plateaued or that the company was too ambitious in their last round of funding, hurting existing investors’ stocks. Because technology companies have been opting to stay private for much longer, companies like Lyft and Pinterest have taken hits to their valuations in going public because of the disconnect between private and public valuations.
At a target of $17, the IPO stock price could see some early investors that bought into Pinterest’s Series G or H round of funding report big losses on their shares. Investors in Pinterest include Goldman Sachs, Kleiner Perkins, the Vanguard Group, and John Hancock Investments, all of which invested at a share price of $21.54.
Even at the high end of Pinterest’s target IPO price of $17, these groups would see as much as a 25 percent loss on each share, taking huge hits on their investment. For example, the Vanguard Group would be taking around $9.5 million hit on its 1.7 million shares.
Coming off the heels of Lyft’s IPO, which saw first-day success before a drop in share price, only time will tell whether Pinterest’s IPO will follow in its footsteps. Now that the proposed IPO is almost finalized, the last piece of the puzzle is determining a date for the actual IPO to occur. Amidst talks of a sliding economy in 2019, Pinterest’s performance as a public company will significantly depend on the success of its IPO later this year.