Pinterest Lowers IPO Expectations

Pinterest’s valuation in its amended S-1 released today is lower than the $12 billion it was gunning for last year.

With price per share ranging from $15 to $17, Pinterest is valued between $10 billion and $11.3 billion.

Could this lower-than-expected valuation indicate skepticism about Pinterest’s core business? Elgin Thompson, managing director of Digital Capital Advisors, believes it’s a case of the underwriter exhibiting more caution, especially given the recent fortunes of Lyft, whose shares fell after it went public, before eventually stabilizing.

“You could argue Lyft was aggressive in their pricing, so perhaps this is a teachable moment for the underwriter of Pinterest to make sure you’re not going to have some difficulty in the secondary market to achieve your cover price,” he said.

Pinterest’s valuation could simply be a pricing mechanism to ensure that its stock price will be well above its IPO price in a few months.

“I don’t believe that it’s related to the fundamentals of the business,” Thompson said. “Pinterest is a good business.”

Pinterest’s revenue, most of it driven by ads, increased 60% from 2017 to 2018, shooting up from $427.9 million to $755.9 million. And while its monthly active user (MAU) growth in the United States increased 8% year over year in 2018 to 82 million, it’s experiencing tremendous international expansion – growing 32% YoY to 184 million MAUs.

Still, most of Pinterest’s profitable users come from the United States – where its 2018 average revenue per user (ARPU) was $9.04, up 47% from the year before. Its international ARPU is just $0.25.

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