LinkedIn More Than Doubles After First U.S. Social-Network IPO
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BUSINESS
by Akhmad Shirojuzzaman
May 19 (Bloomberg) -- LinkedIn Corp., the largest professional-networking website, more than doubled on its first trading day, evidence of surging demand for social-media stock and a comeback in venture-backed initial public offerings. The stock, trading under the symbol LNKD, gained $49.25, or 109 percent, to $94.25 after earlier climbing to as high as $122.70 on the New York Stock Exchange.
LinkedIn finished the day with a market value of $8.91 billion, or about 24 times 2011 revenue, assuming first-quarter sales are matched the rest of the year. Facebook Inc., the world’s largest social network, would be valued at about $95 billion using the same multiple. The gains bode well for other Internet companies that have put off going public while honing efforts to make money and they may brighten prospects for the venture capital industry, which lost money amid an IPO drought.
LinkedIn finished the day with a market value of $8.91 billion, or about 24 times 2011 revenue, assuming first-quarter sales are matched the rest of the year. Facebook Inc., the world’s largest social network, would be valued at about $95 billion using the same multiple. The gains bode well for other Internet companies that have put off going public while honing efforts to make money and they may brighten prospects for the venture capital industry, which lost money amid an IPO drought.
"We knew this was going to be a super hot IPO and gives us further evidence of the enormous appetite for this wave of next- generation Internet companies," Paul Bard, director of research at Renaissance Capital LLC, said in an interview with Bloomberg Television. "You are going to see more companies go public that will try to capitalize on this wave of interest."
LinkedIn’s debut reflects a comeback in IPOs for startups funded by venture capitalists. U.S. venture-backed companies raised $1.38 billion in IPOs in the first quarter, a 47 percent increase from a year earlier, according to the National Venture Capital Association. In the first quarter of 2009 there were no venture-backed IPOs.
Hoffman, Sequoia Gain Too
LinkedIn’s backers, which have made more than $100 million in investments in Mountain View, California-based LinkedIn since 2003, also stand to gain. Sequoia Capital has amassed a holding now worth $1.59 billion, and Greylock Partners has a $1.32 billion stake. Hoffman, LinkedIn’s founder and chairman and its biggest shareholder, holds $1.8 billion and Bessemer Venture Partners has a stake worth $431.5 million.
Still, LinkedIn may not be able to sustain the market value gained today, said Dan Veru, chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC, which oversees $3.8 billion and bought LinkedIn in the IPO.
“At $100 a share, we would not be buyers,” Veru said. “It far exceeded our expectations for what it would do in the first day of trading. It would be amazing to me, with the revenue base it has, if it maintains a $10 billion market cap.”
LinkedIn’s performance is reminiscent of some of hottest stocks in the dot-com boom. Yahoo! Inc. rose 154 percent on its first trading day in 1996, a year after Netscape Communications Corp. more than doubled in its debut.
‘Rich’ Valuation
More recently, Google Inc. rose 18 percent in its 2004 IPO, and VMware Inc. surged 76 percent when it started trading in 2007.
“The valuation for LinkedIn is rich,” said Michael Moe, chief investment officer of GSV Capital Management in Woodside, California, in a televised interview yesterday with Bloomberg West. “To earn the valuation, it has to continue to grow very, very fast.”
Qihoo 360 Technology Co., the Beijing-based provider of computer anti-virus products and Web browsers, had the biggest first-day gain among U.S. IPOs this year, surging 134 percent the day after raising $175.6 million in its offering.
Members of LinkedIn use the site to search for jobs, recruit employees and find industry experts. While users can create personal profiles for free, paid subscriptions were introduced in 2005, giving recruiters more access to candidates and providing professionals ways to communicate with one another.
More Like Salesforce.com
While LinkedIn is often compared with social networks such as Facebook and Twitter Inc., which depend on advertising to consumers, the company said in its prospectus that a “substantial portion” of revenue comes from a business that’s comparable to the software-as-a-service model. That’s where companies deliver software over the Internet, a market expected to climb 16 percent this year to $10.7 billion, according to Gartner Inc., a research firm in Stamford, Connecticut.
SaaS companies, including Salesforce.com Inc., NetSuite Inc. and SuccessFactors Inc., sell subscriptions over the Internet rather than long-term licenses like traditional business-software companies.
LinkedIn’s hiring solutions business, targeted at recruiters, accounted for about half of LinkedIn’s $93.9 million in first-quarter revenue, with 30 percent coming from ads. LinkedIn’s net income rose 14 percent to $2.08 million in the first quarter as sales more than doubled.
Goldman Sells
LinkedIn sold 7.84 million shares at $45 each, the Mountain View, California company said in a statement yesterday. The company raised the proposed price range for its initial offering on May 17, to $42 to $45 a share, from $32 to $35. The sale raised $352.8 million.
Proceeds from the offering will be used to fund existing operations and expand the business, including possibly buying other companies or technologies, LinkedIn said in a filing with the U.S. Securities and Exchange Commission. Including an overallotment option for underwriters to buy an additional 1.18 million shares, LinkedIn may raise as much as $405.7 million.
Morgan Stanley, Bank of America Corp. and JPMorgan Chase & Co. led the offering.
About 62 percent of the shares in the offering were being sold by LinkedIn, according to the prospectus. Other sellers include a venture capital affiliate of Bain Capital LLC, McGraw- Hill Cos., Goldman Sachs Group Inc. and founder and Chairman Reid Hoffman.
Venture capital backers Sequoia Capital, Greylock Partners and Bessemer Venture Partners aren’t selling shares, according to the filing.
Still, LinkedIn may not be able to sustain the market value gained today, said Dan Veru, chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC, which oversees $3.8 billion and bought LinkedIn in the IPO.
“At $100 a share, we would not be buyers,” Veru said. “It far exceeded our expectations for what it would do in the first day of trading. It would be amazing to me, with the revenue base it has, if it maintains a $10 billion market cap.”
LinkedIn’s performance is reminiscent of some of hottest stocks in the dot-com boom. Yahoo! Inc. rose 154 percent on its first trading day in 1996, a year after Netscape Communications Corp. more than doubled in its debut.
‘Rich’ Valuation
More recently, Google Inc. rose 18 percent in its 2004 IPO, and VMware Inc. surged 76 percent when it started trading in 2007.
“The valuation for LinkedIn is rich,” said Michael Moe, chief investment officer of GSV Capital Management in Woodside, California, in a televised interview yesterday with Bloomberg West. “To earn the valuation, it has to continue to grow very, very fast.”
Qihoo 360 Technology Co., the Beijing-based provider of computer anti-virus products and Web browsers, had the biggest first-day gain among U.S. IPOs this year, surging 134 percent the day after raising $175.6 million in its offering.
Members of LinkedIn use the site to search for jobs, recruit employees and find industry experts. While users can create personal profiles for free, paid subscriptions were introduced in 2005, giving recruiters more access to candidates and providing professionals ways to communicate with one another.
More Like Salesforce.com
While LinkedIn is often compared with social networks such as Facebook and Twitter Inc., which depend on advertising to consumers, the company said in its prospectus that a “substantial portion” of revenue comes from a business that’s comparable to the software-as-a-service model. That’s where companies deliver software over the Internet, a market expected to climb 16 percent this year to $10.7 billion, according to Gartner Inc., a research firm in Stamford, Connecticut.
SaaS companies, including Salesforce.com Inc., NetSuite Inc. and SuccessFactors Inc., sell subscriptions over the Internet rather than long-term licenses like traditional business-software companies.
LinkedIn’s hiring solutions business, targeted at recruiters, accounted for about half of LinkedIn’s $93.9 million in first-quarter revenue, with 30 percent coming from ads. LinkedIn’s net income rose 14 percent to $2.08 million in the first quarter as sales more than doubled.
Goldman Sells
LinkedIn sold 7.84 million shares at $45 each, the Mountain View, California company said in a statement yesterday. The company raised the proposed price range for its initial offering on May 17, to $42 to $45 a share, from $32 to $35. The sale raised $352.8 million.
Proceeds from the offering will be used to fund existing operations and expand the business, including possibly buying other companies or technologies, LinkedIn said in a filing with the U.S. Securities and Exchange Commission. Including an overallotment option for underwriters to buy an additional 1.18 million shares, LinkedIn may raise as much as $405.7 million.
Morgan Stanley, Bank of America Corp. and JPMorgan Chase & Co. led the offering.
About 62 percent of the shares in the offering were being sold by LinkedIn, according to the prospectus. Other sellers include a venture capital affiliate of Bain Capital LLC, McGraw- Hill Cos., Goldman Sachs Group Inc. and founder and Chairman Reid Hoffman.
Venture capital backers Sequoia Capital, Greylock Partners and Bessemer Venture Partners aren’t selling shares, according to the filing.
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