After news broke that PayPal was in late-stage talks to acquire social media app Pinterest for $45 billion, PayPal has revealed that it will not be pursuing the deal.
The acquisition talks, which were widely covered by media outlets including Retail Bum, sent Pinterest’s stock soaring by 12 percent and raised the company’s valuation to $40 billion. While Pinterest shares saw an uptick, PayPal’s stock sharply tumbled.
According to people close to the matter, PayPal reportedly offered $70 per share, a 25 percent premium on Pinterest’s share value, before news of the potential acquisition broke last week. However, investors’ reactions to the deal were a mixed bag.
PayPal responded to the news through a quick and to-the-point statement saying: “In response to market rumors regarding a potential acquisition of Pinterest by PayPal, PayPal stated that it is not pursuing an acquisition of Pinterest at this time.”
The acquisition would have enabled PayPal to cut itself a slice of the lucrative $585 billion global social commerce market. Today, the space is dominated by tech giants such as Facebook and its subsidiary Instagram, both of which have been dialing up efforts to drive revenue growth on their platforms. 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.
“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.”
The news follows PayPal’s most recently completed acquisition of Japanese buy now, pay later (BNPL) firm Paidly for approximately $2.7 billion in cash. The transaction is expected to close in the fourth quarter of this year.