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Stock Market News: Pinterest Pops Higher; Is the Square CEO's Gift Good for Shareholders?

By Dan Caplinger – Apr 8, 2020 at 12:08PM

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The market managed to post modest gains.

The stock market kept gaining ground on Wednesday morning, showing a newfound level of optimism among investors despite the ongoing challenges of the coronavirus pandemic. Even though market participants were disappointed to see big gains early Tuesday evaporate over the course of the trading session, they nevertheless hope that comments from former Fed chair Ben Bernanke and others will bring some perspective to the current situation. As of 11 a.m. EDT, the Dow Jones Industrial Average (^DJI -1.71%) was up 277 points to 22,931. The S&P 500 (^GSPC -1.51%) had risen 33 points to 2,693, and the Nasdaq Composite (^IXIC -1.51%) had gained 92 points to 7,979.

Even as companies have to adjust to the new economic realities of the crisis, some are standing out for their efforts. Pinterest (PINS 0.47%) posted sharp gains as the social media company gave its latest outlook on its business. Meanwhile, Square (SQ -1.63%) also saw gains, although some wonder whether promises of coronavirus-related assistance from CEO Jack Dorsey is really a positive for the stock.

Put a pin in it

Pinterest has been a disappointment for those who invested in it soon after its 2019 IPO, but its shares were up 12% Wednesday morning. The social media company's preliminary results gave investors hope for a longer-term recovery even with the pandemic's headwinds.

Screenshot of various Pinterest posts.

Image source: Pinterest.

Pinterest said it expects its first-quarter revenue to be between $269 million and $272 million. That was above the consensus forecast of roughly $267 million among those following the stock, showing that the company has held its own despite the outbreak. Pinterest believes that it had monthly active user counts between 365 million and 367 million for the quarter, split roughly 25%/75% between U.S. and international users.

Its balance sheet also remains strong. The company has $1.7 billion in cash and marketable securities as of the end of March, with no debt and a revolving credit facility providing an additional $500 million in liquidity if needed.

Pinterest did withdraw its full-year 2020 guidance due to COVID-19 uncertainties, and it reported seeing a deceleration in growth in the second half of March. Nevertheless, CEO Ben Silbermann remains optimistic that Pinterest will play a key role in the recovery when it comes.

Squaring the circle

Elsewhere, shares of Square moved higher by 11%. The payment processing specialist's CEO, Jack Dorsey, made a huge pledge of stock to help fund coronavirus relief efforts.

Dorsey made a $1 billion pledge of Square stock to his Start Small charitable fund. In addition to fighting COVID-19 globally, Dorsey said that the focus will eventually shift toward girls' health and education, as well as research into establishing universal basic-income initiatives. The transfer will involve 19.8 million shares, which after today's jump are now worth more than $1.1 billion.

The big question for shareholders, though, is what impact a large gift could have on the stock price. Start Small is a limited liability company and doesn't show up on the IRS list of 501(c)(3) tax-exempt charitable organizations, which Dorsey explained gives it greater flexibility. That would presumably include letting him decide how much of the charitable fund's Square stock to sell at any given time, including selling at a gradual pace to minimize any impact on the stock price. That stands in contrast to some other charitable gifts, in which the receiving charity often has to sell off large chunks of stock in order to avoid a concentrated portfolio that could create fiduciary-duty problems. That forced selling can sometimes cause the stock price to fall precipitously.

Dorsey's gift isn't having any impact on the stock today, and it's unlikely to do so in the near future. Yet it'll be interesting to see exactly how Dorsey uses the stock he's pledged toward charitable efforts, and to what extent he'll follow through, both in fighting coronavirus and with other initiatives.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Pinterest and Square and recommends the following options: short September 2020 $70 puts on Square. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Block, Inc. Stock Quote
Block, Inc.
$54.99 (-1.63%) $0.91
Pinterest Stock Quote
$23.30 (0.47%) $0.11
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$28,725.51 (-1.71%) $-500.10
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,585.62 (-1.51%) $-54.85
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$10,575.62 (-1.51%) $-161.89

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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