Whatâs Going On Here?News broke this week that PayPal is thinking about buying social media platform Pinterest, along with a tasteful throw cushion thatâll really make its bedroom pop. What Does This Mean?PayPal has been trying to broaden its services recently, in a bid to keep up with trends toward both ecommerce and shoppable social media content. Thatâs led it to Pinterest, which the payments company reportedly wants to buy for $45 billion â 26% more than it was worth before the news dropped. That would make it the biggest tech deal of the year, and PayPalâs biggest purchase to date. And why not: PayPalâs share price has more than doubled since the start of 2020, meaning the companyâs in a prime position to offer up its stock, rather than cash, as payment. Why Should I Care?The bigger picture: Is it a bird? Is it a plane?
Pinterestâs 380 million monthly active users can already buy products on the platform via payment platforms like Shopify. But if PayPal makes the deal, itâd be able to process and collect fees on all those orders itself. Thatâd bring PayPal one step closer to its goal of becoming a "super app" for shopping and finance â the American equivalent of Chinaâs Alipay or WeChat.
For markets: Good for the goose, not the gander.
PayPalâs investors werenât optimistic: they sent the companyâs stock down 7% after the news broke. That could be because theyâre nervous that the venture will distract from more important matters, or that PayPal will get tied up with the time-consuming and expensive exercise of content regulation. But for Pinterest, the deal mightâve come at just the right time: the companyâs active user base has slumped post-lockdown, and its co-founder â who has overseen its growth since 2011 â announced his departure last week. Investors, then, might see this as just what the platform needs, which could be why they initially sent its shares up 13%. | 