Pinterest shares surged more than 20 per cent after hedge fund Elliott Investment Management revealed itself as the company’s largest shareholder and expressed support for its new chief executive.

The announcement helped offset disappointing second-quarter results from Pinterest that reflected softness in the digital advertising market, which has afflicted several of its social media rivals.

“Pinterest is a highly strategic business with significant potential for growth, and our conviction in the value-creation opportunity at Pinterest today has led us to become the Company’s largest investor,” Elliott said in a statement on Monday.

In July, the Wall Street Journal reported that Elliott had amassed a more than 9 per cent stake in the company.

The Florida-based hedge fund said Bill Ready, Pinterest’s new chief executive, was the “right leader” to oversee the company’s next phase of growth. Ready joined at the end of June and previously led the commerce and payments division at Google.

Pinterest shares were up 21.7 per cent in after-hours trading on Monday to a four-month-high of $24.32.

The share price jump comes despite the disappointing second-quarter results released by the company on Monday. Pinterest’s revenues rose 9 per cent to $665.9mn, roughly in line with analysts’ forecasts. But expenses were up 29 per cent from a year ago and its net loss of $43mn in the quarter missed Wall Street expectations for a $30mn profit.

Recent reports that Elliott, with its reputation as a formidable activist investor, was building a stake in PayPal gave a boost to the payments company’s share price last week.