Because PayPal won’t pin Pinterest
PayPal has denied plans to acquire Pinterest. Investors weren't impressed with last week's reports of a possible takeover of the social media platform.
PayPal doesn't pin Pinterest.
The US payments giant said on Sunday that it is not pursuing a Pinterest acquisition right now. The announcement ends media rumors last week about negotiations for a deal that would have valued the digital bulletin board company at $ 45 billion .
PayPal's stock was up more than 3% in Monday morning trading on the Nasdaq stock exchange, while Pinterest's stock was down more than 12%.
PayPal's statement broke Pinterest's prospect of gaining access to Pinterest's vast user base.
The Pinterest deal would have been the largest acquisition of a social media company at the reported price and one of the largest tech deals in history, far surpassing Microsoft's $ 26.2 billion LinkedIn purchase in 2016. .
Additionally, the transaction would also have enabled PayPal to capture greater e-commerce growth, as more and more shoppers buy more and more items they see on social media.
However, some analysts now believe Pinterest could attract interest from other bidders, Reuters points out .
All the details.
PAYPAL COMMUNICATION
PayPal said it "is not pursuing a Pinterest acquisition right now." The US company thus quashed the rumors of an imminent $ 45 billion acquisition of social media reported for the first time by Bloomberg .
DRIVEN BY INVESTOR UNCERTAINTY
Market reaction could be driving PayPal's move. The company's stock had lost nearly 5% in the wake of rumors. Pinterest's stock flew over 12% last week.
Yesterday, PayPal's announcement caused Pinterest's stock to collapse on Wall Street. If PayPal's prices rise by more than 3%, Pinterest's prices drop 12%.
Pinterest's one-week trend is weaker than the S&P-500 trend. Such a breakdown could trigger opportunities for the market to sell the stock.
THE DIFFICULT MOMENT OF PINTEREST
Pinterest is grappling with the double challenge of losing its co-founder Evan Sharp and slowing user growth.
The company was valued at around $ 13 billion when it went public in 2019. It also saw a huge spike in users looking for ideas for craft and DIY projects, during the Covid pandemic that forced millions of people locked in the house.
However, as restrictions eased, Pinterest warned of slowing user growth, especially in the US, its largest market. The company expects revenue growth primarily through greater engagement with existing users rather than registering new ones.
Last year, Pinterest signed a deal with Shopify, an e-commerce platform for online retailers, to allow their customers to create catalogs on social media.
ENOUGH SHOPPING FOR THE PAYMENT COLOSSUS?
In recent years, PayPal has in fact sought to enhance its e-commerce offerings through acquisitions.
In 2019 it bought the Honey Science online coupon finder for $ 4 billion and earlier this year the Japanese installment company Paidy for $ 2.7 billion . Not forgetting the acquisition of the Happy Returns returns service provider in May .
But "does it make sense that PayPal joins forces with a more focused e-commerce content business, more than half a decade after its divorce from eBay?" Techcrunch wondered .
THE COMMENT OF THE ANALYSTS
And analysts seem to agree on the risk of the operation (now vanished).
As Reuters reports, Tien-tsin Huang, a payments analyst at JP Morgan, said a deal with Pinterest would pose "a significant integration risk" for PayPal. Especially in terms of culture and execution.
“Running a platform that focuses primarily on promoting user engagement and advertising would require PayPal to use muscles it isn't used to,” Huang said in a statement.
Andrew Jeffrey, an analyst at Truist Securities, told CNBC on Thursday that he was skeptical of a PayPal-Pinterest merger. "A move to make another deal online, including on social media, doesn't make much sense in the long run." According to Jeffrey PayPal needs to monetize in the physical world rather than social media.
However, there are still hopes – outside of PayPal – for Pinterest.
"We believe Pinterest can still be seen as a potential target given its reasonable valuation compared to other social media and the sharp decline in shares in recent months, given a sharp expected deceleration in subscriber growth," said Angelo Zino, analyst at CFRA, in a note on Monday.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/perche-paypal-non-fara-pin-su-pinterest/ on Tue, 26 Oct 2021 10:21:56 +0000.