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LinkedIn's IPO in New York next week is expected to spark a gold rush of social networking flotations
Josh Halliday and Dominic Rushe,guardian.co.uk
LinkedIn, the social network for business professionals, will be valued at $3.3bn (£2bn) when it floats on the New York Stock Exchange next week, setting off a multimillion-dollar gold rush of social media companies.
The nine-year-old social network plans to float on the NYSE on 19 May and said it could raise as much as $274m. In January the firm said it was looking to raise $175m in the initial public offering.
The firm is cashing in amid an increasingly frenzied investor appetite for the next generation of internet firms. It will become the first major US social network to go public and follows the float of Renren, China's version of facebook, which saw its stock soar 40% in its first day of trading on the NYSE earlier this month.
LinkedIn's float is expected to be followed by a wave of flotations including those of Groupon, the online discount business; Zynga, maker of the Cityville and Farmville online games, and Facebook. Facebook's valuation has soared in recent months as investors clamour for shares in the privately held company. The company was valued at $50bn when investors put in more cash in January but its privately held shares have since traded at prices that suggest the firm could be worth more than $70bn.
Analysts said LinkedIn's flotation would be seen as the first real indicator of investor appetite for US social media firms. Colin Gillis, internet analyst at BGC Partner in New York, said: "Renren had everything – it's Chinese and it's social networking. LinkedIn is going to be the first real indicator of demand for the US social network firms."
LinkedIn has about 100 million users and turned a profit of $15.4m on revenues of $243m in 2010. Though other social networks are far larger, notably Facebook with about 700 million users worldwide, the business orientation of LinkedIn's members make them potentially more valuable to advertisers. The company managed to grow through the recession and turned profitable last year having made operating losses from 2007 until 2009.
At $3.3bn, LinkedIn would be priced at 13 times last year's revenues of $243m – a lower multiple than its peers. Facebook has a multiple of 32 times its estimated 2010 sales, according to Nyppex, a private-share market.
The company will offer 7.8m shares at $32-$35 each – the top of its previously expected price range. It said it intends to use the proceeds for general corporate purposes, including working capital, sales and marketing, general and administrative matters and capital expenditures.
Reid Hoffman, co-founder and chairman, and the chief executive, Jeffrey Weiner, are selling a small number of shares, less than 0.5% of the company. They will join the company's other shareholders, Bain Capital, Goldman Sachs and McGraw-Hill, in selling 3m shares in the public offering. LinkedIn will offer a further 4.8m shares.
Other major investors – Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together own about two-fifths of the company – will not be participating.
Unlike more mainstream advertising-supported social networks such as Facebook and Twitter, LinkedIn has a "freemium" commercial model, offering premium services to paying customers, while basic features and registration are free.
According to its flotation prospectus, filed in January, revenue from paying users dropped to 27% of overall revenues for the first nine months of last year, down from 41% in the previous year. Job listings and recruitment contributed 41% of net revenue in the same period, up from 29%. Advertising revenue remained steady at 32%.
Morgan Stanley, Bank of America and JP Morgan are LinkedIn's three lead advisers.
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LinkedIn's IPO in New York next week is expected to spark a gold rush of social networking flotations
Josh Halliday and Dominic Rushe,guardian.co.uk
Inside LinkedIn HQ, Mountain View, California. The firm expects to raise up to $274m in the first IPO for a major US social networking group Photograph: David Paul Morris/Bloomberg News
LinkedIn, the social network for business professionals, will be valued at $3.3bn (£2bn) when it floats on the New York Stock Exchange next week, setting off a multimillion-dollar gold rush of social media companies.
The nine-year-old social network plans to float on the NYSE on 19 May and said it could raise as much as $274m. In January the firm said it was looking to raise $175m in the initial public offering.
The firm is cashing in amid an increasingly frenzied investor appetite for the next generation of internet firms. It will become the first major US social network to go public and follows the float of Renren, China's version of facebook, which saw its stock soar 40% in its first day of trading on the NYSE earlier this month.
LinkedIn's float is expected to be followed by a wave of flotations including those of Groupon, the online discount business; Zynga, maker of the Cityville and Farmville online games, and Facebook. Facebook's valuation has soared in recent months as investors clamour for shares in the privately held company. The company was valued at $50bn when investors put in more cash in January but its privately held shares have since traded at prices that suggest the firm could be worth more than $70bn.
Analysts said LinkedIn's flotation would be seen as the first real indicator of investor appetite for US social media firms. Colin Gillis, internet analyst at BGC Partner in New York, said: "Renren had everything – it's Chinese and it's social networking. LinkedIn is going to be the first real indicator of demand for the US social network firms."
LinkedIn has about 100 million users and turned a profit of $15.4m on revenues of $243m in 2010. Though other social networks are far larger, notably Facebook with about 700 million users worldwide, the business orientation of LinkedIn's members make them potentially more valuable to advertisers. The company managed to grow through the recession and turned profitable last year having made operating losses from 2007 until 2009.
At $3.3bn, LinkedIn would be priced at 13 times last year's revenues of $243m – a lower multiple than its peers. Facebook has a multiple of 32 times its estimated 2010 sales, according to Nyppex, a private-share market.
The company will offer 7.8m shares at $32-$35 each – the top of its previously expected price range. It said it intends to use the proceeds for general corporate purposes, including working capital, sales and marketing, general and administrative matters and capital expenditures.
Reid Hoffman, co-founder and chairman, and the chief executive, Jeffrey Weiner, are selling a small number of shares, less than 0.5% of the company. They will join the company's other shareholders, Bain Capital, Goldman Sachs and McGraw-Hill, in selling 3m shares in the public offering. LinkedIn will offer a further 4.8m shares.
Other major investors – Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together own about two-fifths of the company – will not be participating.
Unlike more mainstream advertising-supported social networks such as Facebook and Twitter, LinkedIn has a "freemium" commercial model, offering premium services to paying customers, while basic features and registration are free.
According to its flotation prospectus, filed in January, revenue from paying users dropped to 27% of overall revenues for the first nine months of last year, down from 41% in the previous year. Job listings and recruitment contributed 41% of net revenue in the same period, up from 29%. Advertising revenue remained steady at 32%.
Morgan Stanley, Bank of America and JP Morgan are LinkedIn's three lead advisers.
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