Activist hedge fund Elliott Investment Management is set to invest a further $1bn in Pinterest, strengthening its position as the company’s largest shareholder and endorsing a newly announced $3.5bn share repurchase programme, according to a report by Reuters.

The fresh equity injection will support the buyback, which represents close to a third of Pinterest’s market capitalisation and is expected to materially reduce the number of shares outstanding. Shares in the image-sharing platform rose nearly 5% in early trading following the announcement.

Elliott previously held a 4.8% stake in Pinterest, valued at approximately $725m as of December, according to market data. The additional investment underscores the activist’s conviction in the company despite a challenging period for the stock, which has fallen more than 32% year-to-date and recently touched its lowest level since the 2020 pandemic after issuing a weak forecast.

Pinterest has faced mounting pressure in the digital advertising market, competing with deep-pocketed rivals including Meta Platforms, owner of Instagram and Facebook.

At the same time, rapid developments in artificial intelligence are reshaping the competitive landscape, with OpenAI testing advertising formats within ChatGPT and Alphabet integrating AI-driven shopping tools into Google Search and its Gemini chatbot.

Elliott partner Marc Steinberg, who sits on Pinterest’s board, said the firm has been a “steadfast supporter” since first investing in 2022 and expressed strong conviction in the company’s trajectory.

Pinterest has been seeking to reassure investors by accelerating its push into AI-enabled shopping features, aiming to monetise its 619 million-strong user base more effectively amid softer advertising spend.