Pinterest's valuation a sign of strength for tech IPOs

NEW YORK • Pinterest Inc's initial public offering set the online scrapbook company's valuation at US$12.7 billion (S$17.2 billion), 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, decor and recipes, was due to start trading on the New York Stock Exchange yesterday. Its performance will be a key test of the tech IPO market after the Nasdaq debut of ride-hailing start-up Lyft 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 was 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 last year. 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 to US$17 target range. At US$19 a share, it raised around US$1.4 billion at a roughly US$12.7 billion valuation.

Pedestrians outside Pinterest's headquarters in San Francisco. Its IPO set the firm's valuation at US$12.7 billion (S$17.2 billion).
Pedestrians outside Pinterest's headquarters in San Francisco. Its IPO set the firm's valuation at US$12.7 billion (S$17.2 billion). PHOTO: AGENCE FRANCE-PRESSE

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.

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 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 this year, 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.

Goldman Sachs & Co, JPMorgan and Allen & Company are the lead underwriters on the Pinterest IPO.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 19, 2019, with the headline 'Pinterest's valuation a sign of strength for tech IPOs'. Print Edition | Subscribe