As our class exited COMM101 after our Finance lecture, I began to think about what stocks I could invest in and why. I looked at successful companies that have products and services I am familiar with and enjoy using. One company that fit that criterion was Pinterest, but I was surprise to find that it is not a public company. I decided to find out what makes Pinterest so successful and why they haven’t gone public.
Pinterest is a mobile app and website that allows users to discover, save and share ideas and products on boards they create.
Pinterest’s CEO Benn Silbermann confirmed in a CNBC interview that Pinterest has over 175 million users and is on track to receive 500 million dollars in revenue this year. In addition, 75% of new sign-ups are from outside the United States and over 40% of total users are men. The company has also seen a 67% growth rate since 2016.
Pinterest has been smart to partner with small business advertisers as well as incorporate app-install ads to their website generating revenue. Pinterest has also partnered with Samsung and their new features, such as ‘Visual Search’.
All of these positive business moves and evidence of stability, make Pinterest a “prime IPO target”, so why hasn’t the company gone public?
In class we learned that there are challenges associated with going public. Those reasons include, the high cost and initial listing fee, performance pressure, market volatility and a greater risk of takeover.
In addition, Benn Silbermann explained that the company has decided not to go public simply because they want to “focus on growing the business” and he is “not sure that going public would help the company retain and grow its user base.”
One major obstacle that the company faces is China’s inaccessibility to the site. China has the largest population per country in the world, and the company is missing out on a large segment of customers.
Finally, if a company goes public it has to share all of its financial statements. This is so stakeholders have a fair understanding of what they are investing in. This also makes companies vulnerable for “copycat” sites. Pinterest has already seen similar sites emerge such as Wanderfly and Gentlemint.
Overall I think Pinterest is a great option for an investor if they did go public in the future. Their business has proven to be successful and is continuing to grow. Just like any business it has considered the risks and challenges of going public and may enter the market when those risks are reduced. Maybe then I will even buy a share myself.
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Sources:
https://www.cnbc.com/video/2017/04/03/pinterest-ceo-no-plans-to-go-public.html
https://www.zacks.com/stock/news/274823/is-pinterest-a-top-ipo-candidate-for-2017
https://business.pinterest.com/en/how-pinterest-works
https://canvas.ubc.ca/courses/810/files/folder/Class%20Slides?preview=111475
Images sources:
https://www.underconsideration.com/brandnew/archives/new_logo_for_pinterest.php
https://smallbiztrends.com/2017/03/pinterest-lens-visual-search.htm