10 Insiders Selling LinkedIn

Jun.11.14 | About: LinkedIn (LNKD)

Summary

LinkedIn needs a plan for profitability.

Overall, 2,768,623 shares were bought and 3,021,619 shares were sold in the last twelve months. Net 252,996 shares were sold.

Recently, 10 insiders sold a total of 32,743 shares at an average price of $147.75.

According to investment firm Whitebox Advisors, in this article, companies including LinkedIn (NYSE: LNKD) are classified as "never, never" firms. In their letter to investors, Whitebox describes the following:

A Never, Never is a public firm that will never, ever make profitability its first priority and will never, ever willingly deliver a penny of cash back to shareholders. If the value of a stock is the appropriately discounted value of all future dividends, we believe the correct valuation of a Never, Never approaches zero.

I believe that the recent insider selling, around the $150 range, complements this notion.

Recent Transactions

Name Position Shares Transacted Transaction Price Date
SZE DAVID Director -1,485 $154.37 6/2/2014
SZE DAVID Director -4,065 $155.20 6/2/2014
SZE DAVID Director -500 $156.30 6/2/2014
SZE DAVID Director -100 $157.02 6/2/2014
SZE DAVID Director -100 $160.45 6/2/2014
TAYLOR SUSAN J S Officer -665 $151.00 5/20/2014
SCOTT J KEVIN Officer -100 $145.61 5/19/2014
SCOTT J KEVIN Officer -200 $148.85 5/19/2014
SCOTT J KEVIN Officer -500 $150.15 5/19/2014
SCOTT J KEVIN Officer -225 $151.18 5/19/2014
MERESMAN STANLEY J Director -101 $145.30 5/16/2014
ROTTENBERG ERIKA Officer -491 $145.28 5/16/2014
ROTTENBERG ERIKA Officer -664 $145.29 5/16/2014
ROTTENBERG ERIKA Officer -281 $145.29 5/16/2014
WEINER JEFFREY Officer -3,320 $145.29 5/16/2014
WEINER JEFFREY Officer -1,666 $145.29 5/16/2014
WEINER JEFFREY Officer -3,643 $145.29 5/16/2014
BATTLE A GEORGE Director -101 $145.30 5/16/2014
SCOTT J KEVIN Officer -1,163 $145.28 5/16/2014
TAYLOR SUSAN J S Officer -51 $145.28 5/16/2014
TAYLOR SUSAN J S Officer -82 $145.29 5/16/2014
TAYLOR SUSAN J S Officer -287 $145.29 5/16/2014
KILGORE LESLIE J Director -101 $145.30 5/16/2014
NISHAR DIPCHAND Officer -1,660 $145.29 5/16/2014
NISHAR DIPCHAND Officer -897 $145.29 5/16/2014
NISHAR DIPCHAND Officer -1,027 $145.29 5/16/2014
SORDELLO STEVEN J Officer -685 $145.27 5/16/2014
SORDELLO STEVEN J Officer -1,660 $145.28 5/16/2014
SORDELLO STEVEN J Officer -673 $145.28 5/16/2014
SZE DAVID Director -1,000 $144.33 5/15/2014
SZE DAVID Director -1,913 $145.50 5/15/2014
SZE DAVID Director -2,314 $146.42 5/15/2014
SZE DAVID Director -613 $147.94 5/15/2014
SZE DAVID Director -410 $148.77 5/15/2014
Click to enlarge

Recently, 10 insiders sold a total of 32,743 shares at an average price of $147.75.

Insider Transactions in the Last Twelve Months

Date Net # of Transactions Shares Bought Shares Sold Net Shares Transacted Price Monthly Volume
Jun-14 -5 -6,250 -6,250 $163.68 10,621,000
May-14 -44 18,911 -45,143 -26,232 $160.09 71,691,000
Apr-14 -45 208,792 -227,142 -18,350 $153.47 75,390,000
Mar-14 -46 253,918 -266,418 -12,500 $184.94 53,562,000
Feb-14 -70 253,918 -280,932 -27,014 $204.04 84,984,000
Jan-14 -56 251,918 -264,418 -12,500 $215.21 48,612,000
Dec-13 -44 255,918 -268,418 -12,500 $216.83 35,100,000
Nov-13 -95 301,932 -331,635 -29,703 $224.03 41,243,000
Oct-13 -98 309,578 -322,078 -12,500 $223.67 61,344,000
Sep-13 -85 304,392 -314,172 -9,780 $246.06 39,771,000
Aug-13 -103 309,515 -363,308 -53,793 $240.04 44,686,000
Jul-13 -59 299,831 -331,705 -31,874 $203.79 38,117,000
Click to enlarge

Overall, 2,768,623 shares were bought and 3,021,619 shares were sold in the last twelve months. Net 252,996 shares were sold.

Current Insider Holdings

Holder Name Amount Held % Shares Outstanding Latest Chg Filing Date
WEINER JEFFREY 209,641 0.20% -8,521 5/16/2014
SZE DAVID 98,188 0.09% -6,250 6/2/2014
NISHAR DIPCHAND 82,239 0.08% -3,476 5/16/2014
SORDELLO STEVEN J 72,815 0.07% -2,910 5/16/2014
SCOTT J KEVIN 54,062 0.05% 0 5/19/2014
ROTTENBERG ERIKA 37,347 0.04% -1,328 5/16/2014
GAMSON MICHAEL 33,539 0.03% 108 5/15/2014
BATTLE A GEORGE 28,738 0.03% -101 5/16/2014
HENKE DAVID 21,898 0.02% -2,165 11/19/2013
TAYLOR SUSAN J S 11,830 0.01% -964 5/20/2014
KILGORE LESLIE J 2,240 0.00% -101 5/16/2014
MERESMAN STANLEY J 865 0.00% -101 5/16/2014
Click to enlarge

Together, insiders hold 0.62% of the shares outstanding.

Source: Form 4

Comparables Table

LNKD US Equity FB US Equity TWTR US Equity GOOGL US Equity MSFT US Equity AAPL US Equity
Ticker (NYSE:LNKD) (NASDAQ:FB) (NYSE:TWTR) (NASDAQ:GOOGL) (NASDAQ:MSFT) (NASDAQ:AAPL)
Company Name: LinkedIn CORP-A FACEBOOK INC-A TWITTER INC GOOGLE INC-A MICROSOFT CORP APPLE INC
Latest Fiscal Year: 12/2013 12/2013 12/2013 12/2013 06/2013 09/2013
Latest Available Period Date: 3/31/2014 3/31/2014 3/31/2014 3/31/2014 3/31/2014 3/29/2014
52-Week High 257.56 72.59 74.73 615.04 41.66 95.05
52-Week High Date 9/11/2013 3/11/2014 12/26/2013 2/26/2014 4/2/2014 6/10/2014
52-Week Low 136.02 23.26 29.51 421.90 30.84 55.55
52-Week Low Date 5/7/2014 6/14/2013 5/7/2014 10/9/2013 8/15/2013 6/28/2013
Daily Volume 2,680,733 69,135,896 36,500,022 1,483,253 15,002,265 62,670,342
Current Price: 6/10/14 163.68 65.77 35.37 568.30 41.11 94.25
52-Week High % Change -36.4% -9.4% -52.7% -7.6% -1.3% -0.8%
52-Week Low % Change 20.3% 182.8% 19.9% 34.7% 33.3% 69.7%
Total Common Shares (M) 120.35 2,547.0 569.9 671.7 8,328.0 6,294.5
Market Capitalization 19,929.6 168,788.7 20,952.3 380,485.8 339,585.5 568,296.1
Total Debt 0.0 392.0 192.8 6,243.0 22,679.0 16,962.0
Preferred Stock 0.0 - - - - -
Minority Interest 5.1 - - - - -
- Cash and Equivalents 2,306.2 12,629.0 2,176.6 61,502.0 88,425.0 150,589.0
Current Enterprise Value 17,628.5 156,551.6 18,968.5 325,226.8 273,839.5 434,669.1
Valuation Average Median
Total Revenue LFY 1,528.5 7,872.0 664.9 59,825.0 77,849.0 170,910.0 53,108.2 33,848.5
LTM 1,677.0 8,916.0 801.0 61,276.0 83,347.0 176,035.0 55,342.0 35,096.0
FY+1 2,126.2 11,850.0 1,268.0 52,280.3 85,078.4 181,931.8 55,755.8 32,065.2
FY+2 2,818.7 15,590.0 2,049.9 61,828.9 95,343.3 193,818.8 61,908.3 38,709.5
EV/Total Revenue LFY 15.55x 16.29x 51.50x 5.36x 2.91x 1.78x 15.6x 10.5x
LTM 12.06x 15.95x 31.86x 5.23x 3.27x 1.87x 11.7x 8.6x
FY+1 8.29x 13.21x 14.96x 6.22x 3.22x 2.39x 8.0x 7.3x
FY+2 6.25x 10.04x 9.25x 5.26x 2.87x 2.24x 6.0x 5.8x
EBITDA LFY 182.3 3,815.0 (524.9) 17,905.0 30,519.0 55,756.0 17,942.1 10,860.0
LTM 181.9 4,540.0 (613.2) 18,742.0 31,803.0 57,795.0 18,741.4 11,641.0
FY+1 523.1 7,310.8 205.6 26,153.8 32,069.4 59,945.4 21,034.7 16,732.3
FY+2 762.5 9,626.4 454.2 31,028.1 33,971.2 63,533.1 23,229.3 20,327.2
EV/EBITDA LFY 130.38x 33.61x -65.23x 17.92x 7.41x 5.46x 21.6x 12.7x
LTM 96.94x 34.48x -30.93x 17.35x 8.61x 7.52x 22.3x 13.0x
FY+1 33.70x 21.41x 92.24x 12.44x 8.54x 7.25x 29.3x 16.9x
FY+2 23.12x 16.26x 41.76x 10.48x 8.06x 6.84x 17.8x 13.4x
EPS LFY 0.23 0.60 -3.41 18.18 2.71 5.68 4.00 1.65
LTM -0.08 0.75 -1.84 18.70 2.80 5.98 4.39 1.78
FY+1 1.65 1.43 0.04 26.73 2.71 6.33 6.48 2.18
FY+2 2.51 1.83 0.25 31.58 2.90 6.88 7.66 2.70
P/E LFY 942.74x 91.08x - 30.82x 12.77x 12.14x 217.9x 30.8x
LTM - 87.69x - 30.39x 14.67x 15.76x 37.1x 23.1x
FY+1 99.44x 46.12x 884.25x 21.26x 15.19x 14.89x 180.2x 33.7x
FY+2 65.13x 36.02x 140.36x 17.99x 14.20x 13.71x 47.9x 27.0x
Revenue Growth 1 Year 57.2% 54.7% 109.8% 19.2% 5.6% 9.2% 42.6% 37.0%
5 Year 84.2% - - 22.9% 8.6% 41.2% 39.2% 32.1%
EBITDA Growth 1 Year 33.4% 221.4% -11369.0% 13.9% -1.3% -4.7% (1851.1%) 6.3%
5 Year 192.2% - - 17.1% 4.5% 44.6% 64.6% 30.8%
EBITDA Margin LTM 10.84% 50.9% -76.5% 30.6% 38.2% 32.8% 14.5% 31.7%
FY+1 24.60% 61.7% 16.2% 50.0% 37.7% 32.9% 37.2% 35.3%
FY+2 27.05% 61.7% 22.2% 50.2% 35.6% 32.8% 38.3%
Click to enlarge

Source: Bloomberg

Conclusions

From the Comparables Tables, you can see that LinkedIn trades at a significant EV/EBITDA and P/E ratio premium to its social networking peers, Facebook (FB) and Google (NASDAQ:GOOG). In fact, only Twitter (NYSE:TWTR), has more difficulty generating profits. I have further included two tech giants, Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) to illustrate the relatively high valuation of the social networking industry. Given the recent insider selling and low insider ownership, I would find it difficult to invest in LinkedIn stock unless management outlines a clear plan to create profits. In addition, I would think about shorting the stock if it significantly exceeds the $200 level.

Although LinkedIn has seen strong revenue growth, I do not believe that the company has currently demonstrated the ability to mirror that change in the bottom line to justify the high multiple. Despite website redesigns, EPS has stagnated in recent quarters. Without strong earnings and no plan to boost shareholder value, the stock should trade at a lower value then it is right now.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.