LinkedIn IPO leads to future concerns

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After the recent Initial Public Offering (IPO) of Silicon Valley job amalgamator LinkedIn, many industry analysts wonder if the company will be able to sustain its rapid growth and be profitable for shareholders.  Last Wednesday’s IPO saw stocks rise from $45 at the beginning of the day to $93 at the close of business, but it might be overvaluing the company. 94 million shares were sold, but another 30 million will be created for employee options and stock grants.  The company is said to be valued around $8.7 billion, about 35 times its 2010 revenue and about 550 times the value of its 2010 profits, leading to questions about sustainability.  By contrast, Google is valued at about 5 times its revenue and 20 times its 2010 profits.

LinkedIn has set a goal of being the main job search website in the world, linking employees and potential employers to each other.  It has already gained considerable footing in the US, with about 45 million subscribers. It could be noted, though, that this leaves little room for additional growth, as the majority of its target audience may have already signed up.  Expenses for the company are also expected to rise as they compete for top quality talent, so it seems premature to call the IPO a great success.  Only time will show if LinkedIn goes the way of so many 1990s tech firms.

 

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Reading Time: 1 minute

After the recent Initial Public Offering (IPO) of Silicon Valley job amalgamator LinkedIn, many industry analysts wonder if the company will be able to sustain its rapid growth and be profitable for shareholders.  Last Wednesday’s IPO saw stocks rise from $45 at the beginning of the day to $93 at the close of business, but it might be overvaluing the company. 94 million shares were sold, but another 30 million will be created for employee options and stock grants.  The company is said to be valued around $8.7 billion, about 35 times its 2010 revenue and about 550 times the value of its 2010 profits, leading to questions about sustainability.  By contrast, Google is valued at about 5 times its revenue and 20 times its 2010 profits.

Reading Time: 1 minute

After the recent Initial Public Offering (IPO) of Silicon Valley job amalgamator LinkedIn, many industry analysts wonder if the company will be able to sustain its rapid growth and be profitable for shareholders.  Last Wednesday’s IPO saw stocks rise from $45 at the beginning of the day to $93 at the close of business, but it might be overvaluing the company. 94 million shares were sold, but another 30 million will be created for employee options and stock grants.  The company is said to be valued around $8.7 billion, about 35 times its 2010 revenue and about 550 times the value of its 2010 profits, leading to questions about sustainability.  By contrast, Google is valued at about 5 times its revenue and 20 times its 2010 profits.

LinkedIn has set a goal of being the main job search website in the world, linking employees and potential employers to each other.  It has already gained considerable footing in the US, with about 45 million subscribers. It could be noted, though, that this leaves little room for additional growth, as the majority of its target audience may have already signed up.  Expenses for the company are also expected to rise as they compete for top quality talent, so it seems premature to call the IPO a great success.  Only time will show if LinkedIn goes the way of so many 1990s tech firms.

 

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