• Activist investor group Elliott Investment Management has reportedly taken a ~9% stake  in Pinterest to become the group’s largest shareholder 
• Elliott Investment Management could push Pinterest to boost its ad revenue in global  markets 

Pinterest’s (NYSE:PINS) shares closed up 16.2% on Friday on the New York Stock Exchange  after the Wall Street Journal reported after market hours on Thursday that activist investor Elliott  Investment Management has built a stake in the digital pinboard platform. 

Top-level departures 

The news came just two weeks after the company, which has been struggling with declining  monthly active user numbers, announced that founder and CEO Ben Silbermann, has stepped  down from the top job after more than a decade at the helm. 

Silbermann, 39, co-founded Pinterest with Paul Sciarra and the company’s former Chief Design  and Creative Officer Evan Sharp in 2010. He was succeeded by Bill Ready, formerly from  Google.  

The Information reported in late January that Pinterest had lost at least seven senior executives  — in roles ranging from creator marketing to corporate development — at the time. 

NYSE: PINS 1H 

Losses mount on shrinking user base 

The CEO change came as Pinterest booked another quarterly loss in the first quarter of 2022.  Net loss totaled $5.3 million in the three months ended March 31, down from $21.7 million a  year earlier, while revenue surged 18% year over year to $574.9 million. 

Still, the company continues to suffer from declining user numbers. Its global monthly active  users (MAUs) in the first quarter narrowed 9% from a year ago to 433 million, falling short of  estimates. In 2021, the company’s MAUs shrank 6% from 2020 to 431 million. 

TikTok wannabes 

Pinterest has employed various measures to bring back users to its platform including  attempting to be like TikTok. The platform launched a video-first feature called “Idea Pins” in  May 2021, allowing users to post short-form videos. It follows the launch of a “watch feature” in  October 2021 that was similar to TikTok’s feature in which users scrolled through short videos. 

Pinterest is not the only app to attempt to be like TikTok. Even Meta Platforms’  (NASDAQ:META) Facebook and Instagram apps have introduced “Reels” to their platforms as  the short-form video trend gains more momentum. Alphabet’s (NASDAQ:GOOGL) YouTube  also introduced “Shorts” in late 2020 to keep up with the trend. 

Elliott stepping in 

With Elliott Investment Management reportedly taking a more than 9% stake in Pinterest to  become the group’s largest shareholder, the activist investor could prompt Pinterest to speed up  the restructuring of the platform’s business strategy.  

Elliott is known for being an aggressive activist investor and among the most notable changes it  helped carry out was the 2021 departure of Jack Dorsey as CEO of Twitter (NYSE:TWTR), the  company he co-founded.

Elliott has also pushed for the spinoff of certain assets from eBay (NASDAQ:EBAY), leading to  the divestment of StubHub in 2019 and Classifieds in 2020. 

The WSJ report, which cited people familiar with the matter, said Elliott has been in talks with  Pinterest over the past several weeks, although the subject of their discussions could not be  determined. 

Kenneth Squire, chief investment strategist at shareholder activism research firm 13D Monitor,  said Elliott’s investment “is a sign of confidence in Ready’s ability to pursue several  opportunities to better monetize the company’s user base.” 

Elliott Investment Management could push Pinterest to boost its ad revenue in global markets  where they are getting 10 to 20 cents per month per user. The platform could also increase its  revenue by bolstering its e-commerce service.  

“Given their expertise and history, we would expect Elliott to look for a board seat here, like they  did at eBay and Twitter,” Squire said. 

Squire expects the shakeup of Pinterest to be amicable as Elliott has gained a lot of respect  from shareholders and directors in the tech sector since it shook things up at Twitter and eBay. 

Pinterest’s shares are down 44% year-to-date as of Friday, and down 71% from a year earlier.