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The wide variety of retail investors holding stocks as Pinterest $59.22 saw their stock and portfolio holding values being toasted during after-hours market trading at the NYSE, with the stock shredding $12 dollars, the stock price moved -18.29% while 76.48 million shares got dumped in the market. This repricing of Pinterest stock price also determined the listed company market cap of shrinking by $10 billion in a matter of minutes, during after-hours market trading, when Pinterest market cap has gone from $49,4 billion dollars to $37,5 billion dollars.

Retail investors and equity portfolio managers should have been aware of Pinterest stock metrics and the potential Value at Risk selloff with quite a large standard deviation and skewness that in fact determined a large fat tail risk. In fact, Pinterest stock metrics have a Value at Risk 4.3 with a tail distribution drawdown -11,7%, the Skewness -2.25 also describes the potential of wide asymmetry of returns from the normal distribution, the standard deviation metric 3.43 also clearly explains that Pinterest stock price has been evaluated far from the mean and that the annual rates of return in the stock should be considered in the context of high standard deviation 3.43, that means also wider patterns of volatility correlated to historical volatility.

A large Standard Deviation metric does not consist of a high stock price being explained as cheap valuation with a larger possibility of the stock going even higher. That’s completely false and inconsistent with market dynamics and metrics definitions, a higher Standard Deviation implies that stock volatility can be higher, also correlated to historical volatility patterns, and that the stock price data points have diverged and deviated too far from the mean and that implies the possibility of larger stock sell-off and tail risk.

Pinterest market cap wipeout of $10 billion dollars with an 18% drawdown, demonstrates the importance of Value at Risk metrics and how the -11,7% drawdown incorporated in Pinterest 4.3 Value at Risk, has been materially exceeded with a larger tail risk dumping of the stock.

Pinterest stock chart also has a clear risk for any potential buyer at its current valuation PINS $59,22, in fact, chart technicals do see a complete drift lower below the moving averages and the IKH Senkou A/B nuage, the consistent signal of a downtrend in motion, the chart oscillators as the MACD also have generated an initial sell signal, with Pinterest stock repricing momentum has the potential to continue, where the price/volume gap structure of $32<$26 dollar range could be a long term Pinterest stock price support area in the chart.

On Pinterest financial metrics, the company since its IPO generated negative cash flow for four fiscal years in a row, 2017/2020.

Dec 31, 2020Dec 31, 2019Dec 31, 2018Dec 31, 2017
Total Revenue1692.661142.76755.93472.85
Gross Profit1243.3783.86514.35294.19
Operating Income-142.5-1388.87-74.72-137.93
Net Income-128.32-1361.37-62.97-130.04

Meanwhile, constraints generated by the Pandemic have seen positive cash flow being generated in the first two quarters of 2021.

Jun 30, 2021Mar 31, 2021Dec 31, 2020Sep 30, 2020
Period Length:6 Months3 Months12 Months9 Months
Cash From Operating Activities375.39270.5828.83-71.87
Cash From Investing Activities-46.9-35.06-47.6251.28
Cash From Financing Activities14.949.3419.646.35
Net Change in Cash343.13244.511.17-14.33

Pinterest financials and structure do require prudence from investors as the company relies on 90% equity financing and 10% debt financing, which makes Pinterest stock holdings quite volatile, while also cash and cash equivalents on Pinterest balance sheet are other marketable securities as money market fund, Treasuries, CDs, Municipal Securities and others, thereby in case of unforeseen liquidity requirements Pinterest will have to sell these other marketable debt securities to access liquidity, otherwise, in any case, utilize U.S. Treasuries as collateral in order to access market liquidity.