PayPal denies Pinterest acquisition plans, avoids ever-tightening regulatory scrutiny on Big Tech mergers

The news: PayPal announced Monday that the potential $45 billion deal to acquire Pinterest wasn’t happening, per Reuters. If it had gone through, it would have been the biggest acquisition of a social media company in the past decade, surpassing Microsoft’s $26 million LinkedIn purchase in 2016.

How we got here: Bloomberg reported last week that PayPal was looking to acquire Pinterest. Many saw the potential pairing as a quest for diversification for PayPal, which now has a long list of internet payments competitors. For Pinterest, the merger seemed like a logical next step in monetizing its large and loyal user base.

• PayPal partnering with Pinterest would have potentially converted half a billion users to paying customers on PayPal’s platform. 32% of shoppers are increasingly buying items they see on social media, per ChannelAdvisor.
• PayPal has been on an acquisitions spree, it took over Japanese buy-now-pay-later (BNPL) firm Paidy for $2.7B and also bought Happy Returns, a company assisting consumers with returns of unwanted merchandise, for an undisclosed sum. PayPal’s biggest acquisition to date has been coupon company Honey, for $4 billion in 2019.
• For Pinterest, teaming up with PayPal would have helped it evolve into a marketplace, possibly rivaling Etsy. Shopify, eBay, and Amazon. Pinterest already has a loyal audience; 89% of its 454 million users use the platform for purchase inspiration, per Omnicore.

The bigger picture: PayPal’s acquisition of Pinterest could have raised red flags, especially with the growing tenor of regulation facing Big Tech companies. Making PayPal the de facto payments provider for Pinterest would have invited government scrutiny and likely held up regulatory approvals, negatively impacting both companies in the short term.

• Since PayPal has denied the acquisition, its shares rose 6.2% to $255.20, Pinterest’s shares fell 10% to $52.50, per Reuters. The pinboard company seems exposed, with investors looking into why it opened itself up for possible sale. Pinterest has also been rocked by a loss of 24 million users as physical retailers reopened earlier this year, with U.S. users dropping 5% YoY.
• PayPal’s interest in acquiring Pinterest, along with a specific dollar amount, could attract other potential buyers to bid on the social network. Conversely, the perception that PayPal backed off the merger could further dilute the value of Pinterest to investors or potential buyers.