Pinterest Inc.'s message to investors was don't compare us to social media or a search engine. The outcome Wednesday was that it raised about $1.4 billion in an above-range initial public offering.
Pinterest operates in a crowded digital marketing space, where Google 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 with some of its peers.
Chief Executive Officer Ben Silbermann likes to project a more virtuistic, less competitive vision of Pinterest, but investors will still be scrutinizing 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 $751 million in its IPO Wednesday and will begin trading Thursday 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 Wednesday for $19 each, after marketing them for $15 to $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 $10.1 billion.
Including restricted stock and options, the IPO values the San Francisco-based company at about $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 $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.
The listing is the second biggest in the U.S. so far this year, after Lyft's $2.34 billion IPO and ahead of Tradeweb Markets Inc.'s $1.24 billion offer. Uber will seek to raise about $10 billion in an offering valuing it at about $100 billion, people familiar with its plans have said.
Zoom, which boosted its share price to $36 from an already elevated range of $33 to $35, is a rare example of a profitable tech startup launching a public listing. The listing values the company at more than $9 billion.
Pinterest has taken a slow and steady approach to growth and making money from the service, compared with 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.
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 $16 billion, and could be much more.
"The ability to monetize 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."
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 percent of internet users in the U.S. and 8 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."
Ali Mogharabi, an analyst at Morningstar Research, said Pinterest has opportunities to increase its share of the $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, we do expect it to attract a small pinch of digital ad spending,'' he said. Mogharabi said he expects a 35 percent 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.
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 U.S. In 2018, more than 80 percent of new users were from outside the U.S., however, they generated about 25 cents per person compared with $9.04 for those based in the U.S.
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 YouTube 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.