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Pinterest Surges After User Numbers Top Analysts’ Estimates

(Bloomberg) -- Pinterest Inc. shares surged after the company reported user numbers that exceeded analysts’ estimates.The digital search and scrapbooking company also withdrew 2020 forecasts after the coronavirus pandemic hurt its advertising business, but investors focused on the growth of Pinterest’s online audience.Monthly active users totaled 365 million to 367 million in the first quarter, higher than Wall Street estimates of 345 million users, according to Bloomberg MODL data. The company also reported preliminary first-quarter sales of $269 million to $272 million, slightly ahead of analyst estimates.“While the company’s ad revenues began to decelerate sharply after the middle of March, engagement on Pinterest has been strong,” Mark Mahaney, an analyst at RBC Capital Markets, wrote in a research note. “In the last two weeks, Pinterest has seen record levels of engagement in terms of search, saving and board creation activity, as users look for ideas on everything from building a home office to fun activities to do with their kids (very necessary).”San Francisco-based Pinterest ended the first quarter with about $1.7 billion in cash, cash equivalents and marketable securities, no financial debt, and stressed that it has not drawn money from its $500 million revolving credit facility.Shares of the company jumped as much as 15% in extended trading. The stock closed at $15.06 earlier in New York trading, leaving it down 40% since early February.That month, the company had projected 2020 revenue of $1.52 billion and said its adjusted profit margin would be flat to up slightly from a year earlier. It scrapped that guidance on Tuesday, saying the Covid-19 pandemic “impacted Pinterest’s advertising revenue globally.”“First-quarter revenue performance was consistent with our expectations through the middle of March, when we began to see a sharp deceleration,” Chief Financial Officer Todd Morgenfeld said.Read more about digital ad budgets evaporating here.Pinterest’s disclosure “largely confirms the negative shock that internet advertising began to experience in March,” RBC’s Mahaney wrote. “With PINS shares up +15% in the after-market, we believe there’s clearly a tell here about how concerned/low market expectations have been.”Pinterest also said that Chief Operating Officer Francoise Brougher is leaving the company effective immediately. Brougher joined Pinterest in early 2018 from payments company Square Inc. Morgenfeld has been appointed to take over her duties.“As we continue to position the company for long-term growth, we believe consolidating our financial and COO organizations under one leader will accelerate our speed of execution,” CEO Ben Silbermann said in a statement.(Updates with analyst comment in fourth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Dorsey Pledges $1 Billion of Square Stake for Virus Relief

(Bloomberg) -- Jack Dorsey pledged $1 billion of his stake in Square Inc., the payments firm he co-founded, to coronavirus relief efforts, the largest pandemic-related donation yet.“I hope this inspires others to do something similar,” Dorsey said Tuesday in a tweet. “Life is too short, so let’s do everything we can today to help people now.”It will likely take several quarters or even years to complete the transfer, according to a Square spokesperson. The proceeds from the initial sales will fund coronavirus relief efforts. So far, $100,000 has been donated to America’s Food Fund to “help fund meals to people impacted by COVID,” according to a publicly available spreadsheet Dorsey linked to in his tweet.“After we disarm this pandemic, the focus will shift to girl’s health and education, and UBI,” Dorsey said in the tweet, referring to universal basic income, the idea that all citizens should be provided with a certain amount of money each month. The pledge represents about 28% of his wealth, he said.Dorsey has been working from his home in San Francisco’s affluent Sea Cliff neighborhood, following shelter-in-place orders that are keeping many people from their regular activities. Also the co-founder and chief executive officer of Twitter Inc., he has a net worth of about $3.9 billion, according to the Bloomberg Billionaires Index. The bulk of his fortune -- about $3 billion -- is made up of Square equity.Shares of San Francisco-based Square, which were little changed during regular trading, dropped about 1% in the extended session.While other billionaires have announced significant donations to combat the pandemic and the anticipated economic turmoil, Dorsey’s pledge is by far the biggest so far. Before his announcement, $2.85 billion had been committed in the U.S. by companies, public charities, family foundations and individuals, according to Candid, a nonprofit research and support organization.Amazon.com Inc.’s Jeff Bezos, the world’s richest person, is donating $100 million to Feeding America. Michael and Susan Dell have committed another $100 million, mostly for global relief efforts. The Bill & Melinda Gates Foundation pledged a similar amount to develop a vaccine and pay for detection, isolation and treatment initiatives. Mark Zuckerberg and Priscilla Chan announced a $25 million commitment last month to help research a possible drug for Covid-19. The couple’s philanthropic organization, the Chan Zuckerberg Initiative, is working with Bay Area hospitals to offer free Covid-19 tests.Black, Ken Griffin Donate to Coronavirus Fight: Donation TrackerThis is not the first time Dorsey has announced a large stock pledge. In 2015, shortly after Twitter cut roughly 8% of its employees, Dorsey said he was donating almost $200 million in Twitter stock back to the employee grant pool. “I’d rather have a smaller part of something big than a bigger part of something small. I’m confident we can make Twitter big!” he tweeted at the time.On Tuesday, Dorsey wrote that he wants to be more transparent with his philanthropy so he and others can learn from it, adding that he’s donated $40 million in the past, mostly anonymously.Across the world, there have been more than 1.41 million virus cases and over 81,000 deaths. The San Francisco Bay Area, where Dorsey and his companies are based, had some of the earliest U.S. cases and authorities in the region took aggressive action to rein in the virus.Aside from the physical and mental toll the virus will take, the economic impact is also severe. The U.S. jobless rate has jumped to 4.4% -- the highest since 2017 -- from a half-century low of 3.5%, and is expected to surge in coming months.“Why now?,” Dorsey said in his Tuesday tweet. “The needs are increasingly urgent, and I want to see the impact in my lifetime.”(Updates with details throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

BlackRock's Aladdin investment management platform to be hosted on Microsoft's cloud

Who’s to Blame for Fallen Angels and Sinking Demons?

(Bloomberg Opinion) -- The coronavirus age demands action. So the Big Three credit ratings agencies are downgrading borrowers with a hammer, moving at the fastest pace on record. Some market observers are already pointing fingers, saying ratings were too high to begin with. But who’s really to blame for all this?Investors don’t like abrupt, large-scale downgrades. Slashing companies’ ratings from investment grade to junk — so-called fallen angels — or to more distressed levels, will spark massive selling pressure in the money management world. Bond funds often have mandates dictating whether and how much they can invest in high-yield issues.Already, Western Asset Management Co., one of the biggest U.S. bond managers, has asked for a waiver from a California public pension fund seeking extra time to get its books in order after two major downgrades pushed the fund over its limit for junk-rated holdings. In the first quarter, fallen angels’ debt outstanding came to about $150 billion, exceeding the peak reached after the collapse of Lehman Brothers Holdings Inc.Ratings for leveraged loans could also turn into a big headache. Most managers of collateralized loan obligations, which package these loans and sell them in tranches, are mandated to limit the weighting of CCC rated issues to 7.5%. No one wants a fire sale.More pain is in store. Over the next six months, another $555 billion worth of angels' debt outstanding might fall, amounting to about 15.7% of the BBB bucket, estimates Goldman Sachs Group Inc. That’s in part because agencies have been slashing their company outlooks. Roughly half of investment-grade bonds are in this rating category.If you’re worried about fallen angels, consider what I’ll call sinking demons, issues that get downgraded from the lowest B notch to CCC. There are plenty of them in the $1.5 trillion leveraged loan market: About 30% of such loans rated by Moody’s Investors Service Inc. are in the B category, versus 12% in 2008. Sinking demons could push the percentage of CCC issuers beyond the 16% peak recorded in 2009, Moody’s warned.Granted, agencies have a moral hazard: They get paid by the issuers they rate. But are they really responsible for so many fallen angels and sinking demons? As I noted last week, the leveraged loan space has ballooned over the past decade, largely because the savvy private equity industry has been stuffing this market with low-quality, covenant-lite issues just a notch shy of CCC.The Federal Reserve is clearly worried. On March 23, it established a facility to buy corporate bonds issued by investment-grade U.S. companies, though it’s still loath to make direct loans to ones in distress. Since the passage of the Dodd-Frank Act in 2010, the central bank hasn’t been allowed to take big credit risks and can only lend with a high degree of protection, either buying assets super cheap or being backed by the Treasury’s money. So passing down lower borrowing costs through the pipeline of investment-grade corporate bonds might seem like a good idea.But is it? By subsidizing the most solvent lenders in the system, the Fed is once again artificially pushing down yields and forcing investors further along the risk curve. In fact, one may argue that the Fed — more than ratings agencies — is the reason so many investment-grade bonds are now clustering at the category’s very low end.Now that Fed Chairman Jerome Powell seems to have put out the wildfire, we are starting to see inexplicable risk-taking behavior again. Last week, Carnival Corp.’s $4 billion new bonds were gobbled up, even though it operates the Diamond Princess cruise that had more than 700 infected coronavirus patients.It’s easy to point fingers at ratings agencies. But in reality, they don't move the pricing needle unless they downgrade by more than one notch, or pencil in a fallen angel or sinking demon. What matters is the Fed.Now if this were China, the government would start giving “window guidance” and telling ratings agencies to stop publishing these aggressive downgrades. Thankfully, the Fed isn’t Big Brother. But keeping would-be angels on life support will bedevil any much-needed reckoning in the credit market.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.