This year is going to be an interesting one for tech-based IPO’s, with many of the world’s most prominent Bay-area start-ups about to go public for the first time. Although some of the excitement behind these public offerings has decreased after Lyft went public recently and shares tumbled, there is still plenty of interest for some of the upcoming multi-billion-dollar IPO’s.
Pinterest is set to go public this week, beginning it’s IPO roadshow on Monday and is expected to go public on the New York Stock Exchange later this week under the ticker “PINS” with a target stock price between $15 and $17 per share.
In it’s IPO filing with the SEC, Pinterest reported that it had 265 million monthly active users as of Q4 2018, a significant growth from the same time last year when it had 216 million users. The company hopes to go public with an $11.3 billion valuation including various stock options. Around 86.3 million shares will be sold to the public, with extra shares given to the underwriters including Goldman Sachs, JPMorgan Chase, and Allen & Company.
Unlike most other tech companies going public, Pinterest isn’t bleeding cash at an exorbitant rate. In 2018, the company lost around $63 million in net losses, as opposed to 2017 where it burnt through $130 million. While still unprofitable, Pinterest’s losses are much less than other major tech start-ups such as Lyft and Uber, with the former’s 2018 losses reaching $911 million in comparison. Investors are also willing to overlook a lack of profitability in major tech companies, which is seen as a sector where a growth-centric strategy takes priority.
What makes Pinterest particularly desirable for investors besides reducing their net losses is the fact that it’s priced itself reasonably. The company’s target share price is below the $21 per share price received in a financing round led by Fidelity Investments back in 2017. In retrospect, Lyft ended up pushing too hard with its IPO target price at $72 per share, which has now fallen down to $59 as investors are starting to avoid the company in favor of Uber’s IPO later this year.
While Pinterest could be considered expensive by traditional financial metrics, investors are likely to compare it to other internet companies like Twitter and Snap . Overall, Pinterest is growing quickly of its reliable base of 265 million users, with revenues up 60 percent last year and are projected to hit $1.1 billion in 2019.
James Cordwell, an analyst at Atlantic Equities, put a target price on Pinterest at $23 per share, writing to clients that “the company’s unique and broadly appealing proposition, offering consumers the ability to view and collate visual recommendations, will enable ongoing robust user growth.” He adds that he expects “significant monetization upside, given the higher purchasing intent of the user base. Twitter gets almost half of its revenues outside the U.S. There is no structural reason that Pinterest can’t be as successful as Twitter.”
Overall, investors have a lot to look forward to in Pinterest’s IPO, with many positive signs promising a smoother, more successful launch then Lyft’s earlier IPO.
