Pinterest valued at US$12.7b in IPO in sign of tech demand after Lyft struggled

A Pinterest banner outside the New York Stock Exchange on Sept 22, 2017. The firm's IPO was above expectations.
A Pinterest banner outside the New York Stock Exchange on Sept 22, 2017. The firm's IPO was above expectations. PHOTO: REUTERS

NEW YORK (REUTERS) - Pinterest Inc's initial public offering set the online scrapbook company's valuation at US$12.7 billion on Wednesday, above its expectations and a sign of strength for the tech IPO market after Lyft Inc's struggles.

Pinterest, where users save ideas for clothes, décor and recipes, is due to start trading on the New York Stock Exchange on Thursday. Its performance will be a key test of the tech IPO market after the Nasdaq debut of ride-hailing start-up Lyft at the end of last month.

Lyft shares have dropped around 17 per cent from its IPO price, raising concerns about bigger rival Uber Technologies Inc when it prices its IPO next month.

A key difference between Pinterest and Lyft however were their valuation expectations. Lyft, which lost US$911 million last year, was seeking a valuation of up to US$24.3 billion in its IPO, higher than the US$15 billion valuation it attained in its latest private fundraising round in 2018. Pinterest lost US$63 million in 2018.

Pinterest's initial target range had set it on course to be valued below its last private fundraising valuation of US$12.3 billion in 2017.

Pinterest had set a US$15-US$17 target range. At US$19 per share, Pinterest raised around US$1.4 billion at a roughly US$12.7 billion valuation.

The fact that Pinterest attained a higher valuation in the IPO will be a relief to investors who participated in prior fundraising rounds and gives some vindication to the company ahead of its public market debut.

Pinterest is also the most high-profile listing of a US social media company since Snap Inc in 2017, a stock which is down more than 30 per cent below its IPO price.

Other IPOs this year, such as cloud computing company PagerDuty Inc and jeans maker Levi Strauss & Co have also traded above their IPO prices since going public.

Investors in IPOs typically expect new companies to outperform the broader market. Renaissance Capital's IPO exchange traded fund is up 30 per cent so far in 2019, compared with a 15.7 per cent rise in the benchmark S&P 500 Index .

IPOs of Pinterest and other such loss-making unicorns - start-up companies with valuations of at least US$1 billion -- have presented a predicament for investors sitting on the fence. They do not want to miss out on popular companies with fast growth, but at the same time have to weigh the risks of businesses with unproven economics.

Pinterest will trade under the symbol "PINS". Goldman Sachs & Co LLC, JPMorgan and Allen & Company are the lead underwriters on the Pinterest IPO.