Pinterest IPO

What we know about the Pinterest IPO

Pinterest is looking to sell 75m shares for a price between $15 to $17. This would give a valuation of up to $11.3bn with aroumd $1.3bn being raised from investors.

A down round

When raising capital you go through a number of rounds. You will start with Seed funding to essentially get your idea off the ground.

This is the Shark Tank style everyone sees and may include raising $500,000 giving investors 20% ownership in the company. This values the company at $2.5m.

Next is Series A, B and C before going public. At each stage, you want the company to be valued more then the previous raise.

Pinterest however, is valued less then its previous round. In 2017, the company raised funds from private investors at the value of $21.54 per share.

So-called “downround” IPOs are considered a stigma for fast-growing tech companies, but they can be quickly forgotten.

Payments company Square was valued in its 2015 IPO at less than half the $6bn it had once been judged to be worth, but it now has a stock market value of $31bn.

What the owners are doing

The filing also revealed that Pinterest’s two co-founders, Ben Silbermann and Evan Sharp, will each be granted restricted stock units worth as much as $39.7m each, vesting over five years.

 Mr Silbermann, Pinterest’s chief executive, already owns shares that would be worth $877.7m at the top of the current pricing range, while design chief Mr Sharp’s existing stake is worth $161.5m.  Another Pinterest co-founder, Paul Sciarra, who left in 2012, still holds stock worth $720.9m.

The finances

Pinterest had revenue of $755.9 million in the year ending December 31, 2018, up from $472.8 million in 2017. It has roughly doubled its monthly active user count since early 2016, hitting 265 million late last year. The company’s net loss, meanwhile, shrank to $62.9 million last year from $130 million in 2017.

The company makes money from online advertising which has a much less burn rate than other companies like Uber and Lyft. Who last year lost $911 million and $1bn+ respectively.

Final Thoughts

Pinterest is still quiet new to online advertising.  As they build out a more sophisticated ads platform, their revenue should rise.

Whilst they are not in the same category as Facebook, they are playing in the same league as Snapchat.  But, with two major differences.

The first being that their core customers have a disposable income. Unlik Snapchat who have users primarily under 23, Pinterest has a core user base of mums 30+. Oh, and brides.  Either way both have dollars to spend that advertisers will pay to get in front of.

The second being that they have a bit more of a competitive advantage.  Facebook were able to implement a similar feature to Snapchat stories on Instagram.  Replicating thePinterest experience will prove to be more difficult.

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