Digital payment behemoth PayPal is reportedly in negotiations to buy digital pinboard firm Pinterest in a groundbreaking $45 billion deal. If finalized, it would conclude the largest deal in the consumer industry in 10 years.
Sources knowledgeable about the talks reveal that PayPal is offering nearly $70 per share for Pinterest. This is a 25% bump from Wednesday’s opening sharing price of Pinterest. The Silicon Valley-based digital payment giant intends to merge digital payment and online shopping space.
A marriage between PayPal and Pinterest would feature the biggest in the consumer internet industry since Microsoft bought LinkedIn for $26 billion in 2016. It also tops the Salesforce acquisition of Slack for $27.7 billion last year. In addition, the deal is also the biggest for PayPal, an eBay spinoff.
PayPal had always wanted to expand its e-commerce interests, and purchasing Pinterest would be a step in the right direction. The firm bought Honey, the coupon platform Honey, in 2019 for $4 billion. The platform informs consumers as they go online shopping. With a possible unity with Pinterest, PayPal hopes to offer “buyable pins,” where people can pin images to their boards and purchase products directly from there.
As of writing, both companies have declined to comment on how the negotiations are going. However, reports on the deal, first reported by Bloomberg, made Pinterest’s share price spike 13%, leading to a $40 billion valuation. Meanwhile, PayPal’s share price dipped by around 5%.
PayPal expanding its vision
The move on Pinterest demonstrates how PayPal is expanding its vision. Previously, it purchased companies directly involved with digital payments that enable consumers to purchase goods and services sans a credit card.
PayPal CEO Dan Schulman revealed to Wall Street analysts that his vision is for the company to become a “super app” that integrates various functions and services, similar to apps operational in Asia. Among the tools he envisions that PayPal would have include “universal shopping carts.” Schulman explains that the company’s future acquisitions would be unexpected.
For instance, many people questioned the firm’s acquisition of Honey; however, the company is “thinking about things and where things are going and not just where they are today.”
Reactions to the deal
Analysts had mixed reactions to the deal, particularly on how the acquisition could benefit both parties. Pinterest has grown exponentially since it went public in 2019. Based in San Francisco, the company earns through ads sales rather than via eCommerce.
Pinterest the app became popular as people flocked to pin images on home improvement, travel, home decor, and others. At present, 454 million users are subscribed to Pinterest. Since the onset of the pandemic, the company’s revenue boomed 50% to $1.7 million in 2020.
However, Truist Financial analyst Andrew Jeffrey was not impressed with the deal, and called it a desperate act that “made zero sense.” As it is, Jeffrey opined that PayPal has struggled with fierce competition in the digital payment industry.
Meanwhile, Union Square Advisors managing director Emily Anderson explained that the deal would benefit PayPal with an increase in customer base without the need for partnerships or advertising.