Professional social networking site LinkedIn has filed for a $US3.5 billion IPO, with a research analyst saying the tech industry can expect the trend to continue as the sector displays signs of “bubble behaviour”.
Although LinkedIn filed for the IPO in January, it is scheduled to float on the New York Stock Exchange on May 19. The move comes amid reports Groupon and Facebook are planning their own public listings.
When LinkedIn flagged the listing in January, it said it could make $US175 million, but now says that figure could be as much as $US274 million. It will offer 7.84 million shares at a price range of $32-35 each.
Last year, LinkedIn made a profit of $US15.4 million from a turnover of $US243 million in 2010. The site primarily makes its money by selling software packages and through premium subscriptions sold to members.
LinkedIn has successfully carved out a niche in the social networking scene, recently counting its 100 millionth user.
While LinkedIn may not be as large as Facebook, which now has more than 500 million users worldwide, the corporate site has a much more professional focus, which has proven attractive for advertisers.
The company will sell 4.8 million shares with the remainder to be sold by company executives, including co-founder and former PayPal executive Reid Hoffman.
Banks Morgan Stanley, Bank of America and JPMorgan will be involved as book runners, while investors Sequoia Capital, Greylock Partners and Bessemer Venture Partners won’t participate. Goldman Sachs is reportedly selling all of its shares as part of the float.
Foad Fadaghi, research manager at market analyst firm Telsyte, says the LinkedIn IPO has been “a long time coming”, arguing the company has been very conservative about its timing in going to market.
“What’s interesting is the speculation that Google may put a bid in for LinkedIn, which would be a very positive strategy as Google doesn’t really have a successful social network as part of its repertoire,” Fadaghi says.
“It indicates that we’re going through a period that many see as an opportunity to raise capital. The market is hot with liquidity – there’s a lot of money in the market right now and the cost of borrowing is quite low.”
Fadaghi says the emerging trend is synonymous with the first dotcom boom, when a lot of companies started to IPO at the same time, and expects it to continue.
“Is it a bubble? It’s certainly showing signs of bubble behaviour. Whether that results in a crash is hard to say because the underlying factors are different from the first dotcom boom,” he says.
“There are more established users, technologies, markets and platforms, so it has the potential to be a lot more sustainable this time round.”