Pinterest Inc (NYSE:PINS) shares surged 9.5% in premarket trading on Tuesday after the image-sharing platform announced that Elliott Investment Management, one of the world's most prominent activist investors, will invest $1 billion in fresh equity, putting it on course to become the company's largest shareholder.
The investment will be used to fund a new $3.5 billion share repurchase program announced alongside the deal.
Elliott was already Pinterest's third-largest shareholder with a 4.8% stake worth around $725 million as of December, having first invested in the company in 2022.
Marc Steinberg, a partner at Elliott who also sits on Pinterest's board, said the firm had strong conviction in the company's direction.
Pinterest has been investing heavily in artificial intelligence-driven shopping tools, helping push its user base to a record 619 million at the end of December.
However, the company has faced persistent scepticism from investors over whether those AI innovations can translate into meaningful advertising revenue growth, particularly against intense competition from Meta's Instagram and Facebook.