The technology companies Pinterest and Zoom Video Communications rallied in their public market debuts, easing concern about “unicorn” listings after the recent stumble by the ride-hailing company Lyft.
Shares in Zoom shot up 72 per cent to end their first day of trading at $62, while Pinterest rose 28 per cent to $24.40. The closing prices valued Zoom at $18bn based on a full-diluted share count, while Pinterest was valued at $16bn.
The gains came after both companies late on Wednesday priced their initial public offerings above their earlier price ranges, pointing to stronger demand than they had earlier indicated.
The news suggested that the slump at the ride-hailing company Lyft, whose shares have fallen 19 per cent since its stock market debut in late March, has not damped Wall Street’s appetite for the latest batch of tech IPOs.
“Everyone had an interest in the sense that the Lyft debacle left a sour taste in people’s mouths,” said Malcolm Burne, co-founder of StarTech NG, which has pre-IPO investments in Pinterest, Lyft and Uber.
“[The Pinterest IPO] is very important for what happens to Uber because sentiment is everything. If Pinterest goes very well, it will be very good for the whole climate around Uber. You don’t want [Pinterest] coming back down below the IPO price.”
Uber, the most valuable private US tech company, is expected to list its shares early next month at a valuation of as much as $100bn.
Some analysts had described Pinterest’s earlier price range as very cautious, and others said the performance of recent IPOs such as Lyft was unlikely to have a big effect on overall demand.
“The fact that some trade up and some trade down isn’t going to affect either of these [IPOs], except at the margin,” said Lise Buyer, an IPO adviser in Silicon Valley who was not involved in either deal.
Institutional investors would value the companies based on their own merits regardless of the reception given to Lyft’s shares, she added, though “the consumer enthusiasm may be affected by the fact that Lyft didn’t have a great first two weeks”.
The price of Zoom shares when it made its debut as a public company
Zoom’s strong opening gave it the biggest first-day “pop” of any IPO so far this year, according to Dealogic. Tech IPOs have opened at an average premium of 23 per cent since 2010, the firm said.
Pinterest, the social media site based in San Francisco, priced its shares at $19 each, raising $1.4bn. Though above its indicated price range of $15-$17, that was still 12 per cent below the price at which it last sold shares in the private market two years ago.
Alongside Twitter and Snap, Pinterest has come to be seen as one of the few companies with a shot at building a big online advertising business, against industry giants Google and Facebook. However, shares in Twitter and Snap have underperformed since their respective IPOs, while Pinterest has so far failed to generate the revenue that investors had hoped when the company last raised money.
By contrast Zoom, a videoconferencing service for businesses, priced its shares at almost 10 times the price that some private investors paid two years ago. At $36 a share, the price was above the company’s $33-35 range, which had already been increased to reflect demand.
Pinterest, which refers to itself as a “visual discovery platform”, said in earlier filings that it planned for revenue growth outside the US, but warned potential investors in its filings that it was “still in the early stages of our monetisation efforts”. About 80 per cent of US mothers were users, it said.
The company, founded in 2010 and known for an ardent user base that posts home decor, food and wedding collages, has been criticised by some for a lack of innovation. It only introduced advertising in 2015, and has not chased opportunities to allow for more direct shopping on the site.
But co-founder and chief executive Ben Silbermann have also won plaudits for shunning Silicon Valley’s “growth at all costs” mentality at a time when companies such as Facebook have come under fire over privacy and security concerns.
Pinterest’s net losses more than halved to $63m last year from $130m in 2017, on revenues up 60 per cent to $756m. By comparison, the image-sharing app Snap lost $514.6m the year before it went public in 2017.
Still, the San Francisco-based platform is dwarfed by the likes of Google and Facebook, accounting for a small slice — less than 1 per cent — of the digital advertising market.
The IPO marked a big win for Pinterest’s venture backers. Bessemer Venture Partners invested in May 2011, when the site was reportedly valued at $40m. Its stake at the IPO was valued at almost $1.2bn, making it the company’s biggest investor. Meanwhile, the venture capitalists FirstMark and Andreessen each have stakes worth more than $800m.
Zoom’s big winners are led by chief executive Eric Yuan, a former engineer from Webex, the star of a previous generation of videoconferencing start-ups. The stakes held by the company’s venture capital backers, Emergence Capital and Sequoia Capital, were valued at the IPO at almost $1.1bn and $1bn, respectively.
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