Pinterest’s pegs IPO price range below its valuation as it seeks to raise US$1.28 billion

Social network sharing app Pinterest is planning to raise as much as US$1.28 billion from investors in its initial public offering (IPO), the tech firm said in an updated prospectus to the United States Securities and Exchange Commission on Monday. The price target of US$15 to US$17 a share would place the firm below its most recent private valuation.

In the filing, Pinterest said it is offering 75 million shares for US$15 to US$17 a share, which after calculations, on a higher range would price the digital pin board company at a valuation of US$11.3 billion. The sum is lower than the firm’s potential valuation of US$12.3 billion last priced by investors in 2017.

Pinterest has started its IPO roadshow in New York on Monday, and will travel to cities including San Francisco, Chicago, and Boston to market its shares. The firm plans to price its stock after the market closes on April 17.

A slew of tech companies are slated to go public this year. Other than Pinterest, others include ride-hailing firm Uber, office-messaging platform Slack, and home sharing booking website Airbnb.

Lyft, another ride-hailing firm, was a highly anticipated tech company which went public last month. The firm’s stock generated a great deal of hype on the first day of trading, with an IPO price of US$72, but the stock soared to as high as 21% or US$88.60 before losing the gains by the end of the day.

Lyft’s shares fell a steep 11.9% on the second day of trading, to US$69.01, which was 4.2% lower than their listing price. As the hype around the new tech stock settled, investors displayed a lack of confidence on the business, as the firm's losses widened over the last two years.

The share price fall from Lyft’s debut further illustrates an environment of often overhyped tech IPOs: fast-growing tech firms which are narratively popular in their brand but have not yet to hit their mark on profitability.

Not following Lyft’s footsteps

The pricing decision from Pinterest was influenced by Lyft’s IPO, as well as a slowing growth in the US, Mr Michael Lin, a consultant at IPO adviser MorganFranklin told Bloomberg. The conservative pricing is to avoid a situation like Lyft, he added.

If demand from institutional investors are high during Pinterest’s roadshow this week, the firm may raise the price of its shares.

A tech company going public lower than its private market valuation is considered a stigma for these fast-growing companies, but some firms have proven to have debuted lower but watch their share prices firm up in time.

Payments company Square for example, went public in 2015 at a US$2.9 billion valuation even though privately it was worth US$6 billion. The tech company now has a market capitalization value of US$31 billion.

For 2018, Pinterest said it hit about US$756 million in revenue from online advertisements, a 60% growth rate that accelerated from the previous year. The firm’s net loss shrank from US$130 million in 2017 to US$63 million last year.

Pinterest says 265 million users go on its platform at least once a month.

Pinterest was launched around 2011, and it allows users to save images and links from websites on digital pin boards. The collage mood boards are often pinned based on themes from the users, on topics like food, hobbies, and wedding.

The lead underwriters on the IPO are Goldman Sachs, JPMorgan Chase and Allen & Co. The company is planning to list its shares on the New York Stock Exchange under the symbol PINS.