Pinterest Inc. should have been the story on Thursday. It had the name that consumers knew, the eight-figure private valuation and a co-founder who has been a Silicon Valley superstar since the service first hit the internet.
In the end, though, Pinterest’s PINS, +28.42% initial public offering was overshadowed by “something that IT managers might buy.”
Zoom Video Communications Inc. ZM, +72.22% ended its first day of trading Thursday with a valuation more than $3 billion higher than Pinterest, according to FactSet, after shares literally zoomed, increasing more than 70%. Pinterest did just fine on its own, as the image-sharing and scrapbooking site popular with women priced its shares at $19 to raise $1.4 billion, then saw them jump 28%. But that couldn’t compare with Zoom’s eye-popping, dot-com-era-worthy first-day pop.
While Pinterest had name recognition in its favor, that paled versus the higher growth rate of Zoom, and the history of trouble for social-media companies on Wall Street did not help. Zoom also had the one thing that no tech unicorn had previously brought to market: Profits.
“They are completely different businesses,” said Dan Morgan, senior portfolio manager of Synovus Trust Co. “Zoom is profitable and Pinterest isn’t, but they seem closer [to profitability than Uber and Lyft]. [Zoom] is old school, these guys make something that IT managers might buy.”
Morgan said Pinterest also reminds him of other social-media companies, with a business model that revolves around data collection and advertising, the latter of which generates the bulk of its revenue. He added that the business model is perhaps getting old for some investors, especially after Facebook Inc.’s FB, -0.28% woes over the past year.