Heads were spinning on Wednesday as reports surfaced of PayPal Holdings (PYPL -1.25%) negotiating a buyout of Pinterest (PINS 1.63%). The deal would reportedly be worth roughly $45 billion, with Pinterest shareholders receiving $70 a share in mostly PayPal stock. 

PayPal stock tumbled 5% on Wednesday following the report, so we know how those investors are feeling about the proposed combination. Pinterest naturally moved higher, but even that camp seemed to be disappointed with the news. They feel that $70 a share in PayPal stock -- or less than $67 after Wednesday's slide -- isn't enough. 

As a shareholder in Pinterest -- and not PayPal -- I'm torn. I wouldn't mind a higher offer, but I can't imagine why PayPal or anyone else would offer a better deal at this point. With a critical metric working against Pinterest's business model right now, it's a bad time to overpay for Pinterest. It's not a bad time for Pinterest to cash out. Try on the engagement ring, Pinterest. You may like the way it fits. Do I have my reasons for wanting to marry Pinterest off? I do.

Someone holding a rose and a gift approaching a date.

Image source: Getty Images.

Users on parade

Pinterest is one of the many 2020 market darlings that are nowhere close to regaining their all-time peaks from February. It doesn't take long to see why Pinterest has fallen out of favor. It's losing more users than it's gaining. 

The number of global active users declined sequentially at Pinterest in its latest quarter, fueled by a decline in U.S. accounts. Stateside active users also declined on a year-over-year basis. The flimsy scapegoat here is that folks were too busy exploring the real world to take the time to share recipes, crafty creations, and slick snapshots on Pinterest. I don't think that's the whole story here.

U.S. active users stalled at 98 million in the third and fourth quarters of last year as well as the first quarter of 2021. Diving down to 91 million was a precipitous drop, but user growth was already stagnant three quarters ahead of the tumble. 

Back out the U.S. traffic and you'll arrive at slowing yet positive international gains, but there's a problem here. The reason why revenue is so strong right now at Pinterest is that the monetization of U.S. users is skyrocketing. Two big data points here are that the U.S. makes up 25% of Pinterest's 363 million total monthly active users, but the domestic crowd generates 78% of the revenue. 

Average revenue per user was $5.08 for domestic users through the three-month period. Average revenue per user clocked in at just $0.36 for the quarter everywhere else. Unless Pinterest sees its stateside audience growing again or its international monetization closing the gap you would expect it to consider any suitor willing to fork over a premium. 

PayPal has a lot to gain by owning Pinterest. It can unlock the potential for e-commerce across Pinterest's site using its own platform to settle up transactions. Unless a bidding war breaks out it will probably get its price. Pinterest investors hoping for a buyout closer to its earlier highs may want to revisit the problematic trend from its latest financial update. Pinterest isn't dead as a growth stock, but the combination -- if it materializes -- makes sense.