Activist investor Elliott Investment Management is investing $1 billion in Pinterest Inc., with the funds set to support the social media company’s years-long effort to buy back shares, Pinterest said in a statement.
The announcement led to a surge in the company’s shares, as they opened 7.6% higher on Tuesday, reflecting strong investor optimism over Elliott’s involvement.
Pinterest, a visual search and discovery platform, is headquartered in San Francisco and has over 600 million monthly active users worldwide, according to the company.
New investment a strong vote of confidence, says Pinterest CEO
The latest share buybacks will be carried out as part of a new $3.5 billion programme approved by Pinterest’s board on Tuesday, according to a company statement. In addition, Pinterest plans to repurchase up to $500 million worth of additional shares using cash on hand.
“Elliott’s investment is a strong vote of confidence in the work we have done to build our business and the significant opportunities ahead for Pinterest,” Pinterest Chief Executive Officer Bill Ready said in the statement.
Meanwhile, Elliott, which first took a stake in Pinterest in 2022, also expressed confidence in the company. “We have been steadfast supporters of Pinterest since we first invested in 2022, and have strong conviction in the company’s trajectory,” said Marc Steinberg, Partner at Elliott and a member of Pinterest’s Board of Directors.
Under the terms of the investment, Elliott will purchase $1 billion in Pinterest’s convertible senior notes, which will have an initial conversion price of nearly $22.72 apiece, representing a 30% premium to the closing price on Monday. The note matures on 1 March 2031, and will bear interest at 1.75% annually.
Pinterest stock under pressure
Pinterest stock has been under sustained pressure in recent months. Its shares recorded the steepest monthly decline in over three years last month after the company issued a weaker-than-expected quarterly sales forecast.
The company reported its Q4 earnings last month, posting a 14% rise in revenue to $1.32 billion, up from $1.15 billion a year earlier. However, the figure fell short of analysts’ estimate of $1.33 billion, according to FactSet.
Pinterest said it expects growth to decelerate further in the current first quarter, projecting growth between 11% and 14%. It is forecasting revenue between $951 million and $971 million, according to WSJ.
In late January, the company cut hundreds of jobs as part of a strategic shift to prioritise investment in artificial intelligence products. Bloomberg reported. Pinterest generates almost all of its revenue from advertising, and has increasingly positioned itself as a visual search engine and discovery platform.
The company’s stock fell 17% in the last one month. It is down nearly 49% over the past year, including a plunge of over 50% in the last six months. On a year-to-date basis, Pinterest’s shares are lower by 30.72%, according to data available on New York Stock Exchange (NYSE).
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