Pinterest (Nasdaq: PINS) shares spiked higher a couple of weeks ago on rumors that the social media company was in late-stage talks to be acquired by PayPal (Nasdaq: PYPL). The move made sense for both parties as many of Paypal's fintech peers have been making aggressive acquisitions over the last couple of months.
Additionally, Pinterest was looking to increase its e-commerce exposure with ad rates likely moving lower with Apple's (NASDAQ: AAPL) privacy changes. Finally, it seems like the natural culmination of a broader trend which is seeing an increasing crossover between social media and e-commerce.
Paypal Not Interested
Despite the obvious synergies, PayPal announced that it was no longer pursuing a buyout of Pinterest for a reported $45 billion, about $70 per share. Interestingly, both PayPal and Pinterest shares were lower following the news. Pinterest misses out on getting access to PayPal's massive user base, while PayPal misses out on growing its e-commerce business in a more horizontal fashion.
The companies did not provide any additional comments or reasons for not going through with the deal. Some Wall Street analysts speculated that PayPal chose not to make the deal because it would distract from its core focus and would be unable to help Pinterest drive user growth and ad delivery. The sentiment around ad businesses has certainly soured in Q3 as all ad companies with the exception of Google (NASDAQ: GOOGL) seem to have missed estimates and warned about upcoming quarters.
Pinterest Stock Falls
The news sent Pinterest's stock 12% lower, and the company kept moving lower until it was down by 30% to new 52-week lows. Overall, Pinterest is down by more than 50% from its 2021 highs and is now back to its October 2020 levels.
Even after this decline, the company faces some serious headwinds with ad revenue likely to decline over the coming year, slowing user growth, and an expensive valuation. The latter makes the stock especially vulnerable as we are seeing rising, short-term rates which can be bearish for high-multiple, growth stocks with declining revenues.