Online commerce and digital payments are inextricably linked. In order to bring them together, PayPal is attempting to do so.
According to individuals familiar with the talks, the Silicon Valley digital payments behemoth has made an offer to acquire Pinterest, the digital pinboard business that also offers e-commerce capabilities inside its app, in a transaction valued at around $45 billion. PayPal has offered approximately $70 per share for Pinterest, according to the individuals familiar with the matter. This represents a 25 percent premium over Pinterest’s opening share price on Wednesday.
According to the data service firm Dealogic, if the transaction is completed, it will be the largest in the consumer internet industry over the past decade, surpassing Microsoft’s $26 billion acquisition of LinkedIn in 2016 and Salesforce’s $27.7 billion acquisition of Slack last year as the largest in the industry over the past decade. It would also be one of the biggest acquisitions for PayPal, which was split out from eBay in 2015 and has since acquired a number of payment businesses across the world.
The acquisition of Pinterest would demonstrate PayPal’s ambition in expanding its e-commerce operations. Earlier this year, PayPal agreed to spend $4 billion for Honey, a coupon payment network that displays savings to customers as they buy on the internet. People may save pictures to digital pinboards and purchase items straight from the app’s “buyable pins,” which are pins that can be purchased directly from the app.
A attempt for response from PayPal went unanswered, and a Pinterest representative refused to provide any more information. Because of the deal’s announcement, Pinterest’s stock price increased by 13 percent on Wednesday, raising the company’s market capitalization to $4 billion. PayPal’s stock price dropped by almost 5%, bringing the company’s market value to $303 billion, a new low. Bloomberg has previously reported on the discussions.
For a long time, PayPal focused on acquiring businesses that were directly linked to digital payments systems, which allow consumers to pay for products and services online without the need of a credit card.
However, PayPal’s chief executive, Dan Schulman, told Wall Street investors last month that the firm aspires to become a “super app,” which would include a variety of services and features, similar to certain Asian applications. Mr. Schulman detailed a “massive road map” for technologies linked to shopping, which included “universal shopping carts,” in his presentation. He predicted that future purchases will take people by surprise.
“Every now and again, we purchase items that people don’t anticipate, like as Honey, and people are surprised,” he said. “It implies that we’re thinking about things and where they’re going rather than simply where they are right now,” says the author.
Even while the San Francisco-based business earns most of its money from advertising rather than from e-commerce, acquiring Pinterest would be a big step in that direction.
Pinterest was established in 2009 by the entrepreneurs Ben Silbermann, Evan Sharp, and Paul Sciarra, with the help of a small team of employees. It gained popularity rapidly, with users rushing to it to “pin” pictures on a variety of subjects, including home décor, weddings, vacation locations, and a variety of other topics. According to the business, it has about 454 million users.
Pinterest went public in 2019, and its stock price has increased by 26 percent over the course of the last year. Revenue grew by almost 50% in 2020, reaching $1.7 billion, as the company’s user growth soared, driven by individuals spending more time online as a result of the flu epidemic.
A agreement with Pinterest, according to Emily Anderson, a managing director at Union Square Advisors, an advising company that is not engaged in the negotiations, may enable PayPal to acquire more customers and keep them without having to entice them with advertising or partnerships.
Yet according to Andrew Jeffrey, an analyst at Truist Financial, any proposed transaction would be “a desperate act of near desperation” that made “zero sense.” Despite increasing competition in its main sector of digital payment facilitation, he said that PayPal was fighting to stay afloat.