LinkedIn IPO heats up

In this photo illustration, the LinkedIn logo is displayed on the screen of a laptop computer on January 27, 2011 in San Anselmo, Calif.

Kai Ryssdal: There's a big IPO scheduled on Wall Street for tomorrow, one that was supposed to be something of a sleeper. LinkedIn, the networking site that focuses on professional contacts, is going public in the morning. It's been doing fine; the initial stock sale was supposed to weigh in at around $2.5 billion.

All of a sudden, though, LinkedIn's the hot new property on Wall Street. The company is now set to raise almost $4.5 billion at the opening bell tomorrow. We sent Marketplace's Stacey Vanek Smith to see what lit the match under LinkedIn.

Stacey Vanek Smith: For all the stardust around social media sites, LinkedIn doesn't get much attention. But tomorrow, the entire tech world will be watching as the company puts its shares up for sale. Sam Ford is director of digital strategies with Peppercom.

Sam Ford: People are watching this IPO as an indicator of what might be to come for Facebook, for Groupon, for a lot of other big and emerging names in the social media space.

Facebook and Groupon are all expected to go public within the next year or so. Those IPOs would be around 10 times larger than LinkedIn's. But LinkedIn could be a crucial indicator of how social media plays out on public markets.

Josh Bernoff is a social media analyst and author of the book, Groundswell.

Josh Bernoff: LinkedIn is clearly still developing as far as profitability goes. The question of whether a successful but not incredibly profitable company can have a successful IPO, that's a question that a lot of companies are going to be interested in.

LinkedIn has already said that it expects to lose money next year as it invests in expanding. That might not play so well on quarterly-earnings-obsessed Wall Street. And there's another real concern for investors, says Peppercom's Sam Ford: most of a social media site's value lies in its popularity.

Ford: How can you guarantee that LinkedIn or Facebook won't become like Friendster or MySpace, five or six years from now?

You can't. But what investors will be most concerned about tomorrow is what happens to LinkedIn's stock price in the next few weeks.

In New York, I'm Stacey Vanek Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.
Log in to post3 Comments

The critique of LinkedIn might have equally been said of Google during its IPO. Google, at that time, had plenty of competition, and, within 5 years, could have also gone the way of Yahoo and MySpace.

AAAuuuugggghhh! Snoopy cry. Linked in has been bombarding me with "requests" to join from friends. But they NEVER sent a request!!! I got a virus from this. Looks to me like a pathetic attempt from LinkedIn to gather "members". Aaauuuggghhh (snoopy cry). It took me weeks to get rid of it. Might they be "soliciting" members in this manner?? They will never have my membership after this!

Kai: you're confusing the valuation of the company with the amount they're raising; they're selling a portion of the company @ a given valuation. Though even that is an over-simplification, and a cause for concern, of this offering.

That valuation seems to have risen from $2.5 to $4.5 billion, but you said: "the initial stock sale was supposed to weigh in at around $2.5 billion. ... The company is now set to raise almost $4.5 billion."

This is WRONG.

They're going to raise about $210 million, though they're selling more than $352 million worth of stock. Why the discrepancy?

Though 7,840,000 shares will be sold only about 61.5% of these shares are new shares being sold the company. 3,012,196 of the 7,840,000 shares being sold are shares owned by existing shareholders--the company doesn't receive any of the proceeds from these shares--who, for whatever reason, don't want to wait to sell their shares.

If they expected the stock to rise and to stay @ higher than $45 they wouldn't sell their shares @ $45; would they?


With Generous Support From...