Pinterest is prepping to make its debut on the New York Stock Exchange.
But its road to going public just hit a speed bump. The social media company's price range for its initial public offering of $15 to $17 a share values it at $9 billion, roughly $3 billion below its estimated valuation two years earlier.
Jack Caffrey, portfolio manager at J.P. Morgan, said going public is an adjustment for a company used to being valued in the private marketplace:
"I think investors ultimately have to make sense of what their options are and certainly when we look at IPOs, there's a lot of art, there's a little bit of science but a little bit more art in terms of trying to go from pricing very specifically negotiated transactions to actually letting the market opine versus what an informed investor is going to negotiate with the individual management team."
Phil Orlando, chief equity market strategist at Federated Investors, said it takes a while for investors to find the right price for newly public companies:
"The way the Lyft IPO came the other day with moving the price up and then the stock trading off was very reminiscent of what happened with Facebook a couple of years ago. Same sort of thing. They could have priced it at a better price, they in my opinion got greedy, the stock came down, it came to a point where there was better value and then money started to come in but that process took a couple of months for the whole thing to wash out."
Kamran Ansari, principal and venture partner at Greycroft Partners, said Pinterest may be purposefully conservative in its pricing:
"IPO pricing is … not precise and sort of like real estate you want to price it at a place that's attractive and get a lot of offers rather than pricing it too high and then have that home on the market that's been reduced eight times. So my sense is that they're probably coming out a little conservative and then we'll see where the demand comes in."
"The old days when you put out an S-1, it used to just be the management, the numbers, how much you're losing, this S-1 is exciting. It talks about what is going on at Pinterest."
Disclosure: Ansari is a Pinterest shareholder.