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Why Pinterest Stock Is on Fire on Wednesday

By Danny Vena – Oct 20, 2021 at 1:07PM

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There are reports that a major player might be courting the so-called "anti-social media" platform.

What happened

Shares of Pinterest (PINS -5.57%) charged sharply higher Wednesday, surging as much as 18.7%. As of 12:39 p.m. EDT, the stock was up 7.9%.

The catalyst that sent the social media company higher was a report that Pinterest has attracted a big-name suitor.

So what

Rumors emerged that digital payments kingpin PayPal Holdings (PYPL -1.66%) is potentially interested in acquiring Pinterest. The story first appeared in Bloomberg, which cited "people with knowledge of the matter," before the report spread like wildfire. 

Three young people looking at each others' smartphones.

Image source: Getty Images.

It isn't clear exactly when the discussions took place, but PayPal reportedly approached Pinterest about a potential buyout offer. The digital payments company and the social media site discussed a price of roughly $70 per share, which would value Pinterest at about $39 billion, according to the report. To put that into perspective, Pinterest shares closed at $55.58 on Tuesday, so the buyout would represent a 26% premium for existing shareholders. 

After an initial surge, Pinterest stock was halted twice on the New York Stock Exchange, as its shares marched quickly toward the proposed higher value. 

Pinterest is generally classified as a social media stock, but prefers to take a higher road. The platform acts as a visual discovery engine and digital repository of users' interests. Pinterest helps users find, save, and organize items of interest from around the internet, pinning them to a digital board. Unlike on other mainstream social media platforms, Pinterest users hardly ever engage in political or other fraught discussions.

Now what

This isn't the first time Pinterest has been approached by a big-name suitor. Reports emerged early this year that Microsoft had tried to buy Pinterest for $51 billion. At the time, the company had rebuffed the advances and talks stalled, as Pinterest preferred to remain an independent entity.

PayPal has already expanded into the red-hot "buy now, pay later" space with its "Pay in 4" installments option. By adding Pinterest to its stable, PayPal would move further into the realm of social commerce, an area that has attracted plenty of attention from big tech.

At this point, this is all just rumor; neither Pinterest nor PayPal has commented on the reports.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Microsoft, PayPal Holdings, and Pinterest and has the following options: long January 2022 $85 calls on PayPal Holdings. The Motley Fool owns shares of and recommends Microsoft, PayPal Holdings, and Pinterest. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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