Pinterest is rare 'unicorn' preparing an IPO without haemorrhaging cash

Pinterest is preparing for its debut on Wall Street with a claim that few other “unicorn” start-ups can make: It is not a financial sinkhole.

While the company is unprofitable, according to an offering prospectus made public on Friday, its losses are nowhere near as high as those of other well-known start-ups like Uber and Lyft, which are also getting ready to list their shares. That makes Pinterest — which lets people create digital “pin boards” — one of the rarer unicorns, a term applied to start-ups valued at more than $1 billion by private market investors.

The deep losses afflicting many high-profile start-ups have cast investor doubts on the herd of companies that are stampeding toward the public market. Lyft recently revealed that it lost $911.3 million last year. Uber previously disclosed that it lost $842 million in the fourth quarter of 2018 alone. PagerDuty, a software start-up valued at $1.3 billion that also filed to go public this week, said in its prospectus that it was losing money. Only Zoom, a video conferencing company last valued at $1 billion, showed that it was making money, in an offering prospectus it filed on Friday.

Pinterest’s filing reported that the company had lost $63 million in 2018. But that was much narrower than a year earlier, when it lost $138 million.

At the same time, Pinterest is growing quickly. The company’s revenue, which came from advertising, totalled $756 million last year, up 60 percent from a year earlier. It listed a cash stockpile of $628 million.

Pinterest also said in the filing that it had 265 million monthly active users in the fourth quarter of 2018, compared with 216 million in the fourth quarter of 2017. Its number of users has grown steadily over the last two years, particularly as people outside the United States have begun to gravitate to its service.

In its prospectus, Pinterest called itself “a productivity tool for planning your dreams.” The San Francisco company emphasised the visual, image-driven nature of its product, as well as its ability to capture people’s intent to buy things related to their pins. It said its mission was to “bring everyone the inspiration to create a life they love.”

The document provides the first detailed look at Pinterest’s balance sheet. The company confidentially filed to go public in February, with Goldman Sachs, J. P. Morgan and Allen & Company underwriting the offering. It plans to list its shares on the New York Stock Exchange under the symbol PINS.

The filing did not say how much money Pinterest hopes to raise in the offering and did not specify potential share prices. Private market investors, who have poured around $1.5 billion into the company, last valued it at $12 billion. Its largest shareholders include Bessemer Venture Partners, FirstMark Capital, Andreessen Horowitz, Fidelity Investments and Valiant Capital Management, according to the filing.

In a move that has become common among tech firms, Pinterest plans to divide its stock into two classes, giving its founders, top executives, employees and directors 20 votes per share. New investors will get one vote per share.

Because Pinterest makes money from online advertising, it is a competitor to Facebook, Instagram, Amazon, Google, Twitter and Snap. In its prospectus, Pinterest listed those companies as competitors, as well as Allrecipes, a recipe website; Houzz, a home-improvement website; and Tastemade, a cooking content company.

Some rivals are not increasing their revenue as quickly as Pinterest, said Kathleen Smith, a principal at Renaissance Capital, a manager of exchange-traded funds for IPOs.

“Like Snap, Pinterest is in the cross hairs of Facebook, and Facebook has always fought a nasty battle against Snap by copying everything it did,” she said, adding that anyone evaluating Pinterest’s stock should consider that competitive threat.

Pinterest was started in Silicon Valley by Ben Silbermann, the company’s chief executive; Evan Sharp; and Paul Sciarra. Mr. Silbermann, 36, previously worked at Google. Pinterest grew out of Cold Brew Labs, a tech incubator founded by the three men in 2008.

Although many unicorns made rapid growth their top priority, Mr. Silbermann favoured what he calls “quality growth.” That meant he tried to build Pinterest slowly and steadily, even as its growth started to soar in 2011. “Pinners,” as users are known, essentially used Pinterest to create collagelike mood boards that expressed their aspirations.

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