March 3 (Reuters) – Pinterest said activist investor Elliott will buy fresh equity worth $1 billion that would help fund a new $3.5 billion share buyback, in a vote of confidence for the image-sharing platform’s efforts to tackle uncertain ad spending.
Shares of Pinterest jumped nearly 5% in early trading on Tuesday as Elliott Investment Management’s purchase would make it the company’s biggest shareholder. The hedge fund already had a 4.8% stake in the company worth nearly $725 million as of December, according to LSEG data.
The buyback represents nearly a third of Pinterest’s market value and will significantly reduce its outstanding shares.
It follows a poor run for Pinterest shares, which last month tumbled to their lowest levels since the 2020 pandemic, after the company’s weak forecast stoked investor anxiety. The stock has fallen more than 32% this year through its last close.
Pinterest has been struggling to compete with deep-pocketed rivals like Meta’s Instagram and Facebook in the online ad market, with major advertisers scaling back spending on the platform just as AI tools threaten to upend the industry.
The competition now also includes OpenAI testing ads in ChatGPT and Alphabet’s Google adding tools for users to buy products directly from AI-powered results in search and its Gemini chatbot.
As one of the world’s most prominent and powerful activist investors, Elliott’s involvement in companies is often viewed as bringing fresh ideas as well as operational and financial discipline that could boost sagging businesses.
“We have been steadfast supporters of Pinterest since we first invested in 2022 and have strong conviction in the company’s trajectory,” said Elliott partner Marc Steinberg, who also sits on Pinterest’s board of directors.
To allay investor worries, Pinterest has stepped up efforts to capitalize on the growing usage of AI-driven shopping tools. It had 619 million users as of December end.
(Reporting by Deborah Sophia and Kritika Lamba in Bengaluru; Editing by Vijay Kishore and Leroy Leo)
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