LinkedIn IPO Valuation Now $4.2 Billion... Is That Too High??? (LNKD, RENN, FFN, GS, MHP, SAP)

We are awaiting the upcoming initial public offering of LinkedIn Corporation.  Apparently, investors are waiting as well.  The new IPO range has been hiked and the company is looking to sell some 7.84 million shares and the price range has been lifted by close to 30% to a range of $42 to $45 per share.  This is one of our own Top 17 IPOs of 2011.

We have a brief poll/survey for investors at the end of this article to see what investors and traders think this pricing should be and/or where it should trade after it opens up.  These can offer a lot of insight into real IPO demand.

If there is one group that is going to be watching closely, it is Mark Zuckerberg and the Facebook crowd.  The reception of LinkedIn could greatly influence how soon the kids want to come public, and we already have reports about discussions with underwriters at Facebook.  Linked is at least considered a real social networking company and it has business subscribers.  We have seen very poor social networking IPOs so far.  Renren Inc. (NYSE: RENN) has been a disaster so far, but speculators and traders appear to be starting to nibble now that it has fallen so much. FriendFinder Networks Inc. (NASDAQ: FFN) has been a total disaster after its IPO but it is one that we do not really consider a true social-networking site like a traditional company.

LinkedIn is offering 4,827,804 shares of its Class A common stock, while selling holders are offering 3,012,196 shares of Class A common stock.  The company’s stock will trade under the stock ticker of “LNKD” on the New York Stock Exchange. As a reminder, when you combine the A-shares and the B-shares, the total shares outstanding after the offering will be 94,498,627 shares.  At $45.00 per share, that implies a market cap of roughly $4.25 billion.

The underlying winners from the LinkedIn IPO may be its backers.  There are many, but its public venture investors include Goldman Sachs Group (NYSE: GS), McGraw Hills Companies (NYSE: MHP), and a unit of SAP AG (NYSE: SAP).  The book-runners are Morgan Stanley, BofA/Merrill Lynch, and J.P. Morgan.  Co-managers are listed as Allen & Company and also UBS.  The company has granted a 30-day overallotment option of up to an additional 1,176,000 shares of common stock.

Of the shares being sold by the company, those proceeds are earmarked for working capital and general corporate purposes, which the company noted “including further expansion of our product development and field sales organizations, and for capital expenditures. In addition, we may use a portion of the proceeds from this offering for acquisitions of complementary businesses, technologies or other assets.”

The company filing noted on its financial performance, “We have achieved significant growth as our network has scaled and as we have expanded our product offerings. From 2009 to 2010, net revenue increased $123.0 million, or 102%, net income increased $19.4 million, or 487%, and adjusted EBITDA increased $33.3 million, or 227%. In the three months ended March 31, 2011, net revenue increased $49.2 million, or 110%, net income increased $0.3 million, or 14%, and adjusted EBITDA increased $4.2 million, or 46%, over the three months ended March 31, 2010. See “Adjusted EBITDA” below for a definition of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income (loss).”

Stay tuned here this week.  LinkedIn is coming public and it’s hot. We have a Wednesday night pricing for a Thursday IPO-trading debut as of now.

As noted, we have a brief poll or survey. If you would not want shares of LinkedIn you can answer that too, but we are interested in finding some sort of equilibrium for a fair market pricing.

[polldaddy poll=5057177]

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JON C. OGG