Pinterest rolled into the market this week with its initial public offering. The company raised about $1.4 billion as it sold 75 million shares for $19 each after marketing them for $15-$17. The company’s IPO price is around $10.1 billion.
Why is it important?
Pinterest has strong competitors in the digital advertising market: Facebook, Google, Twitter, and Snap. In addition, with the recent IPO of Lyft and the upcoming IPO of Uber among other things, investors have a lot of options to choose from when it comes to technological companies. This can make market players think hard whether Pinterest is the right choice.
The company’s financials look positive: revenue from online advertising rose by 60% in 2018 compared with the level of the previous year, while the net loss fell from $130 million to $63 million.
Such dynamics distinguishes Pinterest from other tech firms. The growth of the company was slower but steadier than that of Facebook or Twitter. According to experts, Pinterest will more likely increase its income through the existing users rather than significantly augment its user base.
Pinterest offers its users pictures and ideas for things like clothes, recipes, and furniture. Its audience is more ready to make purchases than users of social networks. In addition, the company provides the opportunity of the visual search. From this point of view, Instagram is its biggest competitor as it developed a feature allowing users to buy things without leaving the app.
The first trading day was successful for Pinterest as the stock rose by 32%. However, this is no indication that the market’s attitude will remain favorable. Despite the fact that Pinterest is looking better than Lyft, the company has a lot of challenges. In particular, Pinterest has to prove to investors that its model will be able to achieve higher monetization and generate growth.