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Paypal reportedly in talks to acquire Pinterest for $45 billion

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Brian Sozzi, Brian Cheung, and Julie Hyman discuss the latest news of Paypal expressing interest in acquiring Pinterest for $45 billion and what this acquisition could mean for the tech space moving forward.

Video Transcript

JULIE HYMAN: And speaking of deals, there's another one that has been reported upon that we continue to watch. And that would be PayPal for Pinterest. Reportedly, according, I believe, to the Financial Times, the two are in late stage talks. And this could value Pinterest as much as $45 billion. It would be, by the way, the biggest tech deal this year thus far, if, indeed, it does happen.

Guys, we have been talking a lot about-- oh, excuse me, CNBC reported they were in late stage talks. My bad. We have been talking about whether this deal makes sense and why it would make sense. Brian Sozzi, what do you think here?

BRIAN SOZZI: I've had a little more time to reflect on it, Julie and Brian. Who am I to argue with PayPal CEO Dan Schulman? I mean, this guy is the best in the business. But I didn't like it at first. I think the Street, a lot of folks on the Street are not sold on it.

But came across this good note from Michael Morris over at Guggenheim explaining why he does, in fact, like this deal. He's noting, quote, "The deeper a company can penetrate a consumer's daily activity, the more long-term economic value that company can potentially provide from its relationship."

I think just to summarize what that means, this is a data play, I think, Brian, for PayPal. Just promote-- just get deeper into commerce than it already is, understand even more what we're shopping for or why we're shopping for it. So from that standpoint, it makes sense.

BRIAN CHEUNG: Yeah, and MoffettNathanson also saying that there's a significant amount of execution risk here. This is an enormously difficult type of thing. There's not, I imagine, a lot of overlap between a social media platform like Pinterest with the payments platform of PayPal. So there's going to be a lot of work if this deal actually is going to happen.

And then, secondly, MoffettNathanson flagging that this could alienate some of the partners that they have right now. We know a lot of Paypal's business is predicated off of having partners that really funnel all the payments through them.

So I think it's really kind of important to just note that if this merger is indeed true, there's going to be a lot of bumps along the road, which I think is a big reason why the stock price, at least for PayPal, was a bit mixed, although it's not uncommon to see an acquirer company kind of see a hit in the wake of an announcement. Pinterest was up pretty significantly, although it appears to be down only about by 1% right now. But a lot of bumps logistically, if this acquisition were to actually happen.

BRIAN SOZZI: Yeah, and one red flag to toss up here. Not necessarily that PayPal would be-- or reportedly using a lot-- mostly stock in this, too. It's that Pinterest growth, it has been slowing the past few quarters as we have become more mobile.

So if you're a PayPal investor, let's keep in mind what you would be paying top dollar for here, a slowing asset that is, in fact, Pinterest. A good asset, but again, growth has been slowing. But Julie, you know who's a fan of this platform? Our producer, Val. I mean, loves, loves Pinterest. I've really never used it, but hat tip to her. She gets it.

BRIAN CHEUNG: I mean, I've never used Pinterest before. But you do kind of wonder, for the longest time, it seemed like maybe one natural route for PayPal was going to be a Shopify type of acquisition, right? Or not that necessarily they'd be buying Shopify, but that they'd be buying something to take on Shopify because they kind of went in the reverse order, right? Shopify being this kind of brand that was helping merchants develop online e-commerce platforms.

And then ultimately expanding into the payment space, as we've seen, has been an enormously successful strategy for them. PayPal starting off clearly as a payments platform, they have a lot of legacy with that. But maybe they would try to go back up into the other side of that thing, where you're trying to become a more direct ecommerce creator for a lot of these types of merchants.

Pinterest is not that platform, right? It's not an Etsy type thing where you have people that are posting photos and trying to sell them individually. I mean, Pinterest can be a platform for that, but it's not as binary as, say, an Etsy. So I guess I do kind of wonder who are they trying to take on with this type of acquisition here. Is it more of an Instagram because Facebook has been pretty bullish on trying to get into that space, or is it more of a Shopify?

BRIAN SOZZI: Hold still, Brian Cheung. I'm trying to pin you to my board. Hold on a second.

JULIE HYMAN: I've used Pinterest. It's fine.