What's going on?
Social media platform Pinterest made its stock market debut to much investor applause on Thursday – its share price immediately ballooned 25% (tweet this).
What does this mean?
In raising $1.4 billion, Pinterest hit the stock market with a share price of $19 – higher than the range it proposed earlier this month, which had valued the entire company below what private investors last determined it was worth.
Pinterest’s apparent success in initially “lowballing” its valuation – perhaps generating additional demand for its shares, since new investors thought they might get them at a discount to the Pin’s previous price – may interest Uber-watchers. The ride-hailing giant pulls up to the market in May, but at a lower valuation than investment banks mooted last year. Those banks may be hoping investors see Uber’s stock as a bargain too.
Why should I care?
The bigger picture: Zoom also hit the stock market.
Teleconferencing firm Zoom Video Communications has a rare trait among tech initial public offerings (IPOs): it’s profitable. Zoom’s Thursday debut saw tech-hungry investors send it 80% higher in early trading – and, like Pinterest, its initial share price had already topped previous proposals, thanks to rampant investor demand. Zoom’s valuation, however, was nine times greater than at its last private funding round.
For markets: Day one in such a big way…
A new stock’s first-day performance often determines whether investors see its IPO as a success, especially in the US. But buyer beware: while the average day-one rise of a new stock in the US is 18%, according to Bloomberg, most of that benefit accrues to existing investors as the clamor from new backers drives up the price of admission. What’s more, five years down the line, 60% of IPO stocks will be trading below their initial price. And there’s also a danger investors get a little muddled in their excitement: an unrelated company called Zoom Technologies saw its stock mysteriously jump 67% on Thursday…