Pinterest’s shares soared on Wednesday after news broke that PayPal is eyeing the company as it looks to enter the social commerce space primarily dominated by tech giants such as Facebook.
The deal would value Pinterest’s shares at $70 per unit, representing a 26 percent premium on Pinterest’s Tuesday closing price.
Pinterest filed for an IPO in April 2019 and it was valued at just $10 billion at the time of its stock market debut.
“We see how it can make sense for the company,” Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods Inc., said in a note to clients. “Pinterest could enhance engagement between consumers and merchants with PayPal being a central facilitator in the commerce journey, thereby feeding into the company’s vision of being a super app.”
PayPal’s move to acquire the company is also a response to competitive pressures from Shopify, which has been doubling down on its efforts to blend online shopping and financing, a person close to the deal told CNBC. In 2020, Shopify partnered with buy now, pay later (BNPL) solution provider, Affirm, to offer ShopPay, the company’s new checkout financing solution. PayPal offers its own “Pay in 4” solution.
An acquisition of Pinterest would also help the company cut itself a slice of the lucrative $585 billion global social commerce market. Tech giants such as Facebook and its subsidiary Instagram have already invested heavily in making their various products shoppable. Facebook, for example, began testing a “Shop” tab on its app’s home screen. Meanwhile, Instagram allows shoppers to shop through posts and live stories.