With an eye on becoming a super app, PayPal in talks to buy social media app Pinterest

PayPal is reportedly looking to secure the biggest tech deal of the year and buy social media app Pinterest in a $45 billion deal first reported by Bloomberg.

Bloomberg said the companies are discussing an offering of $70 a share for the social media app, a 1.26x multiple on the closing price on Tuesday before the deal was reported.

This move would represent PayPal’s entry in the advertising business, aiming to bring the payments company closer to being a “super app” – like China’s WeChat or Alipay – offering users a digital e-commerce and finance ecosystem.

“Previously disparate parts of the physical world are coming together in the digital world, like payments, basic consumer financial services, shopping tool sets, deals, offers, wish lists,” said PayPal CEO Daniel Schulman at an investment conference last month.

The transaction would also be PayPal’s biggest acquisition to date, after it bought online coupon startup HoneyScience for $4 billion in 2019. 

But considering the market’s reactions after the announcement, it doesn’t look like investors feel it’s a win-win situation. 

Following the report, PayPal’s stock fell by almost 5% to $238.4 per share, which translated into a $15 billion reduction in its market capitalization, signalling a negative reaction to the news from the company’s investors.

Meanwhile, shares in Pinterest took on 13% to close at $62.7 per share yesterday, a $4.6 billion increase in market cap. 

Pinterest is an online photo-sharing platform that generates revenues through advertising, with plans on developing its e-commerce platform. It expanded its partnership with Shopify earlier this year to grow its global reach. 

However, Pinterest is still a relatively small player in the digital ad market, with its second quarter revenue of just over $600 million, representing 60% of rival SnapChat’s. Amazon, one of the biggest players in this market, had over $7.9 billion in ad revenue as reported in its “other” segment which also includes sales related to other service offerings.

Moreover, the social media company’s stock market performance has been uneven over the past year, fluctuating between $50 and $90 per share, experiencing a significant drop in July after it announced that its second quarter U.S. monthly active users dropped by 5% compared to a year before.