In response to reports last week that PayPal Inc (PYPL.O) was in discussions to purchase digital pinboard site Pinterest Inc (PINS.N), the digital payments business said on Monday that it is not seeking acquisition of the digital pinboard site for as much as $45 billion at this time.
Pinterest, which is presently dealing with the loss of its co-founder Evan Sharp, as well as a slowdown in user growth that has limited its future prospects, will take a hit from this recent event.
The potential of Pinterest shareholders receiving a portion of PayPal’s equity has been eliminated, as has the possibility of gaining access to the payment giant’s vast user base.
PayPal’s one-line announcement didn’t provide any further information on the incident. After being contacted for further information, neither company responded.
Last week, Reuters and other news outlets reported on the progress of the negotiations. Reuters reported at the time that PayPal had offered $70 per share for Pinterest, with the majority of the money being paid in shares.
Prior to news of discussions with Pinterest, PayPal’s shares had climbed more than 35% in the previous 12 months, owing to a surge in digital payments during the COVID-19 epidemic. The company now has a market valuation of about $320 billion.
Although PayPal’s shares have lost 12 percent of their value since then, experts and analysts have attributed the decline in investor interest to the collapse of the discussions, while others have pointed to difficulties in integrating Pinterest into PayPal.
A note to clients from Tien-Tsin Huang, a payments analyst at JP Morgan, stated that “acquiring Pinterest would introduce significant integration risk, particularly in terms of culture and execution, as running a platform primarily focused on driving user engagement and advertising would require PayPal to use muscles it is not used to using.”
The announcement that the discussions were no longer in progress received a good response from PayPal’s stockholders. Mid-day trading saw shares of the digital payments business rise 3.6 percent, according to Bloomberg. In the week after the announcement of the merger negotiations, Pinterest’s stock rose 13 percent, but it has since lost almost all of its recent gains and is down roughly 12 percent to $51.1 per share.
IN THE MIDDLE OF CROSSROADS
Sharp, together with Ben Silbermann, who now serves as the firm’s chief executive officer, and Paul Sciarra, who left the company in 2012, developed the online scrapbooking and photo-sharing platform in 2010.
Sharp said earlier this month that he would be leaving his position as a chief creative officer to join LoveFrom, a company founded by Jony Ive, who is known for designing numerous Apple Inc (AAPL.O) products.
As worldwide lockdowns have been lifted, Pinterest has issued a warning about a deceleration in user growth, particularly in the United States, which accounts for the vast bulk of the company’s user base. Pinterest has said that it anticipates growth to come mostly from greater interaction with current users, rather than through new sign-ups to the platform.
Despite a 30 percent increase in the previous quarter, Pinterest’s total monthly active users (MAUs), a closely monitored indicator, increased by just 9 percent to 454 million in the June quarter, according to the company.
At the reported price, the Pinterest transaction would have been the largest acquisition of a social media business, surpassing Microsoft Corp.’s (MSFT.O) $26.2 billion purchase of LinkedIn in 2016, which was the previous record.
As more buyers increasingly purchase products they see on social media, frequently following “influencers” on sites such as Instagram, TikTok, and even Pinterest, it would have enabled PayPal to capture more e-commerce growth.
As one of the largest pandemic winners, PayPal, has been on an acquisition binge of late, most recently acquiring Japan’s BNPL business Paidy for $2.7 billion earlier this year. PayPal is one of the largest pandemic winners.
For an unknown fee, it also bought Happy Returns, a startup that facilitates the return of undesired products purchased online, in May. The transaction will help the company expand its e-commerce capabilities and build on its $4 billion acquisition of online coupon site Honey Science in 2019.
