Pinterest (NYSE:PINS) stock is up nearly 15% today on media reports that activist investor Elliott Management has taken a 9% stake in the social media company that allows people to post photos, videos, and images online.
Elliott Management is a hedge fund run by billionaire investor Paul Singer and it has a track record of getting involved with struggling companies and helping to turn them around. According to a report in the Wall Street Journal, Elliott Management is now the largest shareholder in Pinterest and has already entered into discussions of how to improve the social media company.
Before today’s rise, PINS stock had declined 75% over the past 12-months to trade at $17.56 per share.
What Happened
The main issue at Pinterest is that the company has been losing users coming out of the Covid-19 pandemic. The number of monthly active users on the platform fell 6% in 2021 to 431 million, raising concerns that the app is losing its popularity. However, it should be noted that Pinterest’s revenue increased 52% last year to reach $2.5 billion.
Still, the declining number of users has already prompted change at Pinterest. Last month, company co-founder Ben Silbermann resigned as chief executive officer (CEO) and was replaced by Bill Ready, a former Google e-commerce executive. The company has also been toying with subscription fees and other ways to monetize the site beyond the traditional advertising it has relied on until this year.
Why It Matters
Elliott Management’s involvement with Pinterest could lead to new changes at the social media site or a quicker turnaround. The hedge fund has a history of taking large positions in companies and then pushing for substantial changes, often leading to acrimonious relations. In 2020, for example, Elliott Management acquired 10 million shares of Twitter (NYSE:TWTR) and pushed the social media company to grant it seats on its board of directors and to undertake a $2 billion stock buyback program.
Elliott Management also waged a public battle to oust then Twitter CEO Jack Dorsey. Although Dorsey survived Elliot’s attack on his leadership, he stepped down as Twitter’s chief executive late last year. Owing to its aggressive style, Elliott Management has been referred to in the media as a “vulture capitalist.” It been criticized over its efforts to agitate for change at public companies in the U.S. and abroad.
What’s Next for PINS Stock
Can Elliott Management turn around the fortunes of Pinterest and unlock shareholder value? Investors seem to be betting that it can judging by the way PINS stock is rising today. News that Elliott Management has become the largest shareholder of Pinterest is being taken as good news. However, investors should keep in mind that it could take some time before any positive changes are brought about at the social media company, with or without Elliott Management’s help.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
