New York - LinkedIn said it expects to raise 30% more than
it had forecast in its initial public offering, in a sign of the strength of
investor appetite for social networking companies.
The company, which operates a website where professionals
connect with one another, now plans to sell shares at $42 to $45 each, up from
a previous range of $32 to $35.
At the middle of that range, the nine-year-old company would
be valued at $4.11bn.
The new price range values LinkedIn at almost 17 times its
2010 revenue. That is about half the valuation multiple that investors are
giving to Facebook, which is expected to go public in April 2012 and now has a
market value of around $70bn.
Both companies are expensive compared with other tech
stalwarts, including Google, whose shares trade at about six times revenue.
To some investors, LinkedIn's valuation is too high.
"I wouldn't touch the stock, I wouldn't own it, not at
$45, not at $43," said Eric Jackson, managing member at hedge fund
He might be willing to buy it at a much lower price, like
around $25 a share, he added.
The stock market's reception of LinkedIn will be an
important gauge of investor appetite for social networking, including the Big
Four of the social media space - Facebook, Twitter, Groupon and Zynga - which
are widely expected to go public in coming years.
LinkedIn's growth has been rapid: It doubled its revenue
last year to $243.1m and posted net income for common shareholders of $3.4m.
However, in the risk factors section of its prospectus, the
company disclosed it does not expect to be profitable in 2011.
"Our philosophy is to continue to invest for future
growth, and as a result we do not expect to be profitable on a GAAP basis in
2011," the filing said, referring to generally accepted accounting
It is not uncommon for an unprofitable company to seek a US
public listing, but it could give investors pause to see a company bluntly
forecast swinging to a loss during its first year as a publicly traded stock.
"If LinkedIn goes out and doesn't trade well that could
present a problem marketing other social media companies going forward,"
said Yvan-Claude Pierre, a corporate lawyer at DLA Piper in New York who has
represented companies that are going public.
Companies such as Facebook, Twitter, Groupon and Zynga have
stoked investor interest in social media companies and command
multibillion-dollar private market valuations.
But there are signs investor appetite could be waning.
Renren, a company sometimes called the Facebook of China, went public in the
United States earlier this month. Its shares soared 29% in their debut, but
have since dropped below the IPO price.
French social networking site Viadeo, the second-biggest
social networking site for professionals behind LinkedIn, said on Monday it
would defer plans to go public.
Ironfire's Jackson thinks LinkedIn has some positives,
including its built-in professional audience, but its biggest problem is its
"LinkedIn has its niche and Facebook has its niche.
Facebook's is much bigger and much more profitable," Jackson said.
Of the 7.84 million shares LinkedIn is offering, 4.83
million will come from the company and the rest from stockholders.
LinkedIn co-founder and ex-PayPal executive Reid Hoffman is
among the stockholders selling shares in the IPO, but he will still have 21.7%
of the voting power in the company after the offering. LinkedIn began in
Hoffman's living room in 2002.
Other big stakeholders selling shares in the IPO include
Goldman Sachs Group, Bain Capital Venture Integral Investors LLC and
LinkedIn, based in Mountain View, California, helps
professionals find new business contacts and reconnect with old ones.
"It's like a Rolodex on steroids," said Rich
Stromback, a venture capitalist who uses LinkedIn frequently.
Underwriters on the offering are being led by Morgan
Stanley, Bank of America and JPMorgan. The company's shares are expected to
begin trading on the New York Stock Exchange on Thursday under the symbol