Pinterest's shares surge 25 percent in debut

Shares of Pinterest Inc surged 25 percent in their debut on Thursday, giving the online scrapbook company a market capitalization of $15.8 billion and signalling increased investor appetite for new tech listings.

The successful debut bodes well for the U.S. IPO market as it readies for the much-awaited listing of ride-hailing giant Uber Technologies, particularly after smaller rival Lyft Inc`s struggles to hold on to its debut gains.

Investors are hopeful that Pinterest, the most high-profile social media company to list in the U.S. since Snap Inc in 2017, will have a better run in the market, given the company`s ability to grow revenue and increase its user base.

The company`s shares opened at $23.75, well above the $19 they were priced at, and touched a high of $24.99 in its first hour of trading.

"When you see an initial pop in price like this it`s a pretty clear indicator interest is strong out of the gate," Chris Larkin, senior vice president of trading at E*TRADE Financial Corp said.

Adding to the upbeat investor sentiment was a successful debut by Zoom Video Communications, another technology company that soared 80 percent above the IPO price of $36.

Pinterest allows users to search for various topics, from home improvement projects to travel tips, with results often showing handy infographics.

It also lets users to create social "boards", which relate to certain topics or theme, and earns money through advertisements, which are placed among the "pins" or posts that users upload on the site.

In 2018, the company`s top line rose by more than 150 percent from 2016 to $756 million, while its net loss shrank by two-thirds over the same period to $63 million.

The company expects to report 291 million global monthly active users as of March 31, an increase of 22 percent compared from a year earlier.

Pinterest is showing clear path to profitability and is a good return on investment, Haran Segram, professor of finance at NYU Stern School of Business said. "This company is on the right track."

Segram, however, cautioned that the company was overvalued.

"Based on my analysis I find this company expensive or overvalued."

IPOs of Pinterest and other such loss-making unicorns -- startup companies with valuations of at least $1 billion -- have presented a predicament for investors sitting on the fence.

While they do not want to miss out on popular companies with fast growth, but at the same time have to weigh the risks of businesses with unproven economics.

Pinterest`s IPO was underwritten by a 12-member team that included Goldman Sachs and JPMorgan.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)