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MARKETS LIVE BLOG:

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Pinterest Tones Down IPO Pricing: Will These ETFs Benefit?

Sanghamitra Saha
Stitch Fix, YY, Facebook, Netflix and Apple highlighted as Zacks Bull and Bear of the Day

After Lyft Inc.’s LYFT muted Nasdaq debut, tech unicorns are probably a little apprehensive about going public this year.

At the end of March, the ride sharing company Lyft hit the market withits IPO priced at $72. The stock rallied more than 20% on debut but is down 2.5% at the current level most likely due to overpricing concerns.

Uber, Slack, and Postmates have filed for IPOs but Pinterest will be the second high-profile tech firm to make a public appearance this year.

Pinterest, the image search company, is planning to offer 75 million shares at $15 to $17 and raise about $1.3 billion from its IPO expected next week under the symbol "PINS” on NYSE.

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However, the latest IPO pricing drags the valuation of the company below $9 billion, which is way under what Pinterest was valued at (i.e. $12 billion) in its last fundraising round in 2017.

Will Low Pricing Open Up Road to Success for Pinterest?

Lyft was initially expected to price shares between $62 and $68, but investor enthusiasm drove it to $72. Higher pricing opened the stock to muted response. Probably taking lessons from Lyft’s story, Pinterest moderated its pricing. This could result in decent trading once it is public and the company may hold on to the initial price on its second day in the market.

Investors should note that the company reported $756-million revenues in 2018 in its IPO prospectus. Revenues grew 60% year over year, though the company incurred a net loss of $63 million. In a seasonally strong fourth quarter, revenues rose 58% year over year to $273.2 million. Pinterest has 265 million monthly active users and its user base is still increasing at a considerable pace, particularly abroad.

ETFs to Watch

Though the following ETFs presently don’t own any stake in of Pinterest, the IPO might see its addition in a number of funds in the near future. (read: Will IPO ETFs Sizzle in 2019?).

Below we highlight three ETFs that might consider including Pinterest in their holdings after IPO, or at the very least, be in focus given the recent IPO boom. These funds may benefit if the Pinterest IPO turns out to be red-hot, especially after the modest pricing decision.

First Trust US IPO Index Fund FPX
 
The product tracks the IPOX-100 U.S. Index, giving exposure to the booming U.S. IPO market. The ETF focuses on 100 largest and most liquid U.S. IPOs. This is a rules-based value-weighted index measuring the average performance of U.S. IPOs during the first 1000 trading days. It charges 59 bps in fees.

Renaissance IPO ETF IPO
 
The fund gives exposure to the U.S. IPO market. The ETF tracks the rules-based Renaissance IPO Index, which is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the Index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% and removed after two years. It charges 60 bps in fees (read: Uber, Lyft, Slack, Pinterest, Other Hot IPOs & ETFs: What You Need to Know).

Invesco NASDAQ Internet ETF PNQI

The underlying NASDAQ Internet Index is a modified market-capitalization weighted one designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses and listed on one of the three major U.S. stock exchanges. The fund charges 60 bps in fees.

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Renaissance IPO ETF (IPO): ETF Research Reports
 
First Trust US Equity Opportunities ETF (FPX): ETF Research Reports
 
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
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Zacks Investment Research
 
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