Looking for a replacement for trading Twitter shares?
Now that Elon Musk’s buyout of Twitter has been completed, and the company has been taken off the trading market, what comparable stocks can traders look to trade now?
Of course, there are other social media compatriots that traders could turn to, or even other companies of a similar market capitalisation that are in takeover talks and abiding by a similar volatility. A stock that might just fit the bill could be the social media outlier; Pinterest.
Pinterest sometimes likes to position itself as the antithesis of Twitter and Instagram, where users find inspiration rather than encountering toxicity and developing body-image disorders. While I can’t speak to the truthfulness of this claim, Pinterest is still categorised as a social media platform and its stock price can be affected by some of the same micro and macroeconomic events that affect this sub-sector. As such, and as illustrated on the chart, Pinterest and Twitter have followed a very similar stock price trajectory. This parallel in stock prices would have been a lot closer if not for Musk’s bid for Twitter at an inflated price in April 2022, and the subsequent court battles that led to him eventually completing the buyout.
Pinterest, like Twitter, may also start fielding takeover bids, hopefully at a chunky premium.
In October 2021, PayPal offered $45 billion for Pinterest, which would have been the costliest acquisition of social media company since Microsoft bough LinkedIn for $26 billion in 2016. The bid would have represented a premium of 24.5% over PINS share price the day before the announcement. However, PayPal reneged its bid shortly after offering it when investor sentiment proved to be against the deal, and PayPal tanked ~12.0% in the three days after revealing an offer had been made.
As of November 2022, the value of Pinterest has slipped to $16.5 billion and may be a more attractive price for other suitors, especially if the value that PayPal’s board saw in Pinterest (and that Paypal’s investors overlooked) has been retained. Perhaps suggesting this is true was Pinterest’s third-quarter earnings report in the final week of October 2022. Pinterest reported that its third-quarter revenue increased 8% year-over-year to $685 million. Pinterest shares have surged ~11% in the last five trading days.
What make this remarkable is when you compare it to other social media and tech stocks, particularly Facebook which is down ~29%, and Alphabet (which owns YouTube) which is down ~8% since they reported their respective earnings around the same time last week. The latter has even been rumoured to be exploring an acquisition of Pinterest after Alphabet’s CEO Sundar Pichai gave a coy response to a question put to him in September about targets the company was considering for takeover.