LinkedIn IPO

RATM

That was some news about LinkedIn today- upon launch the shares climbed 83% and finished at 109% on close of business.

http://money.cnn.com/quote/quote.html?symb=LNKD

http://www.washingtonpost.com/business/technology/linkedin-ipo-shares-pop-84-percent-on-first-trade/2011/05/19/AF5MZA7G_story.html

Just wondering could anyone shine any light on how IPO's typically work? I read that the Linkedin one was massively over-subscribed. Anyone know where do you typically apply to be on the initial IPO? I think one of the agents for it was Merrill Lynch- is it the case that they'd be looking after their big clients for the IPO and they would typically take everything available? Or is it a lottery type system ?

dunkamania

Yep, its the brokers that are handling the deal that decides who among their client list gets how many shares. If a deal is expected to go well, than you will likely only get a fraction of amount of shares you request. hence clients tend to put in orders for much more shares than they actually want.

willietherock

IPO's should classified as speculations rather than investments.

neris

Could be worth taking a short on them. hype dies off and down they go

SGKM

Investment banks underwrite an IPO (buy all shares that aren't bought) a large proportion would be made available to institutional investors pre sale and then some would be offered to the public - hence driving the price up. The underwriting IB does not want to be left with stock it cannot shift so will do deals with institutional investors to take big quantities of stock pre sale.

We were talking about this in work today and how we all thought it was massively over valued. It was trading at something like 27x REVENUE... that is daft stuff! Either the IB's running the IPO got it massively wrong or the company is way overvalued, I definitely suspect the latter. I cannot see the growth coming from it, but I am very skeptical about it's business model.

waitingforBB

Agree, I think its massively overvalued.
Its links with facebook and the hype around social media seems to be driving price.
I dont see the business model to justify 27x price.

neris

I can never understand how tech companies like facebook and linkdin can make so much money or what they are exactly selling. at least with the likes of amazon, oracle and more so now google you have an idea of where revenue comes from. Before facebook bebo was the thing now wheres that?

TheInquisitor

waitingforBB wrote: »

Agree, I think its massively overvalued.
Its links with facebook and the hype around social media seems to be driving price.
I dont see the business model to justify 27x price.

Ah man its normally calculated on net profit after tax... The current trades are at 667x!!!!!!!!

15 million net profit

Value is roughly 10 billion at the moment. Absolutely crazy.

200-300 million would be normal price for internet company. 1 billion would be madly speculative. 10 billion is just throwing your money away. Its like 30 years of profit at much higher levels has already been priced in .

strmin

neris wrote: »

I can never understand how tech companies like facebook and linkdin can make so much money or what they are exactly selling. at least with the likes of amazon, oracle and more so now google you have an idea of where revenue comes from. Before facebook bebo was the thing now wheres that?

You understand where Google's revenue comes from, but not Facebook's??!!

christeb

Was LinkedIn scammed? - from the NYT

SGKM

Interesting article, I dont 100% agree with it as I'm of the opinion that linkedin is benefiting from the "facebook" bubble hype and is fundamentally overvalued. For an IB, it is a cross between setting the price low enough so that you wont be left holding the stock and satisfying the client. But 7% is a massive fee and obviously takes into account the risk of the under writing the IPO.

You can also be doubly sure that the equity research departments of ML and MS will be writing "positive" research reports on Linkedin for some time to "encourage" buying of the stock and help ensure that the IPO has been a success.

KellyAnn2

The revenue and earnings growth that would have to occur just to justify the current valuation is tremendous. In my opinion, that leaves limited upside potential and plenty of room to move lower following any failure to meet expectations. That's just not the kind or risk/reward profile I look for when searching for an investment.

neris

looks like reality is kicking into the market. good drop down in price today but rallied near close but still closed down

christeb

Irish LinkedIn employees should be happy, they were given anything from 2,000 shares and up. A nice windfall for them.

coylemj

The problem that I have with companies like LinkedIn is that anybody who is ever going to register on such a website is probably already on it. Where is the growth supposed to come from to justify the huge multiplier built in to the share price?

The only 'growth' I see for LinkedIn is negative growth such as happened to MySpace when their users decamped en masse after Rupert Murdoch bought it and where is Bebo these days?

What's to stop a competitor doing the same thing to LinkedIn?

ttmd

While I agree with most of the sentiments voiced here, whats the opposing point of view? There has been loads of bad press about the price, which imo seems to be justisfied, but I would, at least, like someone to explain why he/she thinks this company is worth it, or even to explain what seems to be a huge anomaly.

laoisman11

Does anyone have any further update on Linkedin?

The Motley fool was pushing it strongly last week and I had planned to have a look over it this weekend. Then on Friday, it went up 20%.

The current PE ratio is 787, so all profits for the foreseeable future are priced into that. For the last 4 quarters, revenue has been doubling every 90 days (according to MF) and annualised EPS is 0.19. Even if they continue their current annual growth rate of doubling profits every year at a constant shareholder base, their EPS in 3 years would be 1.6. At today's price of 150$, that would be a PE of 93. In my limited understanding of shares, that would still be expensive........

Every comment I read regarding this stock has been negative, I was wondering if anyone had any other opinion/insight?

Cheers.

Adrock-aka

LinkedIn is going to replace a large portion of the global recruitment industry. It took a big, complex, fragmented series of small, inefficient hiring processes and started streamlining them effectively. Just like Microsoft made computers user-friendly, Google made the web more user-friendly, and Apple made consumer products user-friendly - LinkedIn will make the entire recruitment process user-friendly for companies, recruiters, and 200m+ people well into the future. Monetization can come in a lot of ways, it's become indispensable.

Got in heavy at $108 and still think it's a buy. I'm looking at the 5-10 year outlook. Can't comment on a short term play.

RATM

Adrock-aka wrote: »

LinkedIn is going to replace a large portion of the global recruitment industry. It took a big, complex, fragmented series of small, inefficient hiring processes and started streamlining them effectively. Just like Microsoft made computers user-friendly, Google made the web more user-friendly, and Apple made consumer products user-friendly - LinkedIn will make the entire recruitment process user-friendly for companies, recruiters, and 200m+ people well into the future. Monetization can come in a lot of ways, it's become indispensable.

Got in heavy at $108 and still think it's a buy. I'm looking at the 5-10 year outlook. Can't comment on a short term play.

As someone who works in recruitment I wouldn't entirely agree. In order for them the revolutionise the recruitment industry they would have to have at least 80 if not 90% saturation . As far as I am aware they have (at most) 20-25% of professionals with profiles. The problems only begin there- a big percentage of these are inactive.

As a recruiter Linkedin is certainly a tool I will use into the future. However it is only one of a number of them. I don't see that ever changing and nor do I see Linkedin ever becoming more than 20% of any search techniques/strategies I employ. Because if I am searching a talent pool and Linkedin only has 20% of the entire talent pool then I'd be dumb not to use other avenues. I can't see that changing.

Their biggest problem though is that recruiters don't necessarily have to pay them a cent- when I search Linkedin I don't use Linkedin to do it- I use Google. Why? Because it is better at search, I can find anyone I want with any skills I want and (crucially for Linkedin) Google is free.

laoisman11

Thanks for the feedback.

I remain undecided so I'll keep my money in my pocket.

RATM

I haven't looked at the fundamentals of Linkedin, my above comments were only from a user perspective (a heavy user though, I'm on it around 15+ hours per week.

There might be a compelling argument to invest based on their financial fundamentals, I don't know because I haven't looked. But from a user point of view I don't think that they are 'all that'. If I was looking for an internet company with proven revenues and further growth yet to come then it is hard to rule out Google and that is where I'd begin.

laoisman11

For me, the user perspective is very important in evaluating a company. If users are happy, willing to stay with the product/service and judge that it is superior to everything else on the market, it gives me a lot of confidence. All the same, this has to be backed up by their finances.

In my opinion, Linkedin are not ticking both boxes.