LinkedIn sets IPO for next week

Professional networking site to offers shares at $32 to $35

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LinkedIn has set a share price for next week's initial public offering that could raise nearly $170 million and value the social networking site for business professionals at more than $3 billion.

The company said in a filing with the Securities and Exchange Commission that it will offer 7.84 million shares at a price of $32 to $35. LinkedIn will trade on the New York Stock Exchange under the ticker symbol LNKD. The public offering is expected for May 18.

(Also see: LinkedIn reportedly planning IPO)

Only 4.83 million of the shares will be sold by the company. The rest will be offered by early private shareholders, including investment banks Goldman Sachs (872,000 shares) and Bain Capital (654,000).

Also offering shares to the public will be LinkedIn executives and board members, including co-founder Reid Hoffman, whose shares could earn him $4 million when the IPO goes out. Hoffman will retain about 20 percent of LinkedIn's shares after the offering.

LinkedIn's public offering is being underwritten by Morgan Stanley, J.P. Morgan and Bank of America Merrill Lynch. The company announced plans to go public in late January.

In its SEC filings, LinkedIn reported 2010 revenue of $243 million -- versus $120.1 million in 2009 -- and net income of $15.4 million. That's up from a loss of nearly $4 million the previous year.

In the first quarter of this year, LinkedIn sales more than doubled to $93.9 million from $44.7 million, while profit was $2.08 million, up 16 percent from $1.82 million a year ago.

LinkedIn makes money through paid memberships (that includes premium services), recruiting deals, and advertising. Last year 43 percent of the company's revenues came from corporate recruiting contracts.

The company had 85 million members (most with the free, basic membership) at the beginning of the year and surpassed 100 million members by March.

One potential Achilles heel for LinkedIn is the relative infrequency with which members visit their page. The company warns in its prospectus that the "substantial majority of members do not visit on a monthly basis."

So while the average LinkedIn member is there for professional (and presumably more focused) reasons compared to the average Facebook member, their connection to LinkedIn is much weaker. This makes LinkedIn vulnerable to a challenger that can draw away members.

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