- According to a report from advertising media company GroupM, Pinterest has about $1.4 billion of outstanding restricted shares held by the company’s 1,800 employees as part of their compensation packages.
- The report says the average Pinterest employee has about $700,000 in equity based on the $12 billion valuation from its last funding round in 2017.
- Pinterest is expected to be one of tech’s first “ undercorns” by setting a share price below that valuation during its initial public offering this week.
- According to the report, Pinterest’s conservative pricing may help set investor expectations by tempering internal disruption and high employee turnover.
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Employees at Pinterest, which is set to have an initial public offering this week, each have an average of $700,000 in company stock, according to a report released by advertising company GroupM on Monday.
The average equity held by Pinterest employees is less than was the case with Snap employees when it went public in 2017, GroupM says, but still represents a significant risk of employee turnover after the IPO.
“At these levels Pinterest employees will be heavily impacted by stock performance,” writes GroupM head of business intelligence Brian Wieser in a public report.
A volatile stock price after an IPO can cause internal disruption and excessive employee turnover, he writes.
According to the report, Pinterest has about $1.4 billion of outstanding restricted shares given to the company’s 1,800 employees as part of their compensation package, amounting to about $700,000 per employee based on the $12 billion valuation the company previously used internally. By contrast, Snap’s roughly 1,900 employees had a total of $2.4 billion in unvested equity among them ahead of the company’s 2017 IPO, Wieser says.
Playing it safe has its benefits
Many privately held technology startups compensate employees with a combination of salary and equity. The equity typically comes in the form of stock options or restricted stock units, and vests over a four-year period. Employees must typically wait 6 months after the IPO before the so-called lock-up expires and they can begin selling the stock on the open market.
Pinterest is expected to begin trading on the New York Stock Exchange on Thursday under the ticker symbol “PINS.” The company plans to sell 75 million shares at a yet to be finalized price of between $15 and $17 a share.
At the high end, the offering would give Pinterest a market value of $11.3 billion, which is below the $12.3 billion valuation the company commanded during its last private funding round in 2017.
That step down in valuation, which makes Pinterst a so-called undercorn, may look like a disappointment on the surface, but Wieser argues it’s probably a good thing in the long run.
“Going public with a relatively-conservative valuation and managing reasonable expectations are important. Doing otherwise can lead to employee morale and employee churn worsening over time, at least when compared with what would happen if a company were too aggressive in how it went public and how it provided guidance or reacted to unrealistic expectations,” the report states.
Pinterest did not respond to Business Insider’s request for comment.
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