LinkedOut

$4.2 billion valuation?  Really?

I’m so not feeling the LinkedIn IPO (proposed ticker is LNKD).  I’m sure they’ll orchestrate a nice opening pop for it, but I’m only watching it as a gauge of risk appetite as well as what the future may hold for other social media-ish IPOs.

Here are two takes on the forthcoming deal that I thought were interesting today…

My pal Eric Jackson says it’s probably a deal to avoid in his Forbes column.  The risk factors, as he sees them, are as follows:

  • Many others are starting to come after this niche, including Salesforce (CRM) with their Chatter product and Twitter and Facebook could always try to professionalize part of their service.
  • China has recently blocked LinkedIn, to allow internal competitive services to develop.
  • The actual number of LinkedIn users is likely much smaller than the 90 million advertised members.
  • Profitability really took a hit in the last year as LinkedIn more than doubled its spending on sales and marketing, product development, and general and administration.  That wiped out most of their operating income, which was only running at 8% in 2010.  This lack of profitability speaks to the biggest problem for the company which is the lack (so far) of a killer central way they make money.  Most use it for free.

Shira at Deal Journal also pulled up something interesting.  LinkedIn’s big jump in pre-IPO valuation represents the biggest since the halcyon tech bubble days of 2000!

We wondered: when was the last time we saw a U.S. IPO price bump this much? Turns out you have to travel in the Silicon Valley way back machine to 2000. Avid readers will remember early 2000 was the precipice just before the tech bubble went pop. (Apologies for mixing our metaphors.)

Here is the rundown, based on data from our friends at Dealogic.

LinkedIn IPO: Initially priced at $32 to $35 a share earlier this month. Today, LinkedIn said it expects its shares to debut at between $42 and $45 apiece. Based on the halfway point of the two price ranges, LinkedIn’s IPO price was bumped up by nearly 30%.

Nothing about this coming stock interests me in the least.  I also am not a fan of the service so if you hit me up on LinkedIn, don’t be surprised if it’s weeks before I see it.

Sources:

Why You Should Opt Out of the LinkedIn IPO (Forbes)

LinkedIn IPO: Biggest Price Bump Since Tech Bubble (Deal Journal)

 

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