LinkedIn Sets Terms for $263 Million IPO

| About: LinkedIn (LNKD)

LinkedIn Corporation (NYSE:LNKD), the world's largest online professional site offering networking, communications, and job opportunities for professionals and businesses, officially launched its IPO on Monday. The Mountain View, CA-based company plans to raise $263 million in an initial public offering by selling 7.84 million shares at price of $32-$35 apiece. That's up from its original S-1 filing at the end of January, when it estimated a deal size of $175 million. At the midpoint of its proposed range, LinkedIn will have a market value topping $3.3 billion or just under 9x annualized sales (based on first quarter revenue of $94 million).

LinkedIn generates revenue from the sale of hiring solutions to enterprises and professional organizations, marketing and ad sales, as well as the sale of premium subscriptions to members including enhanced search results, communication capability, organizational functionality and customer support. It generated $48 million in adjusted EBITDA on $243 million in sales in 2010, a 102% increase from the $120 million in sales achieved in 2009. In the first quarter of 2011, revenue again more than doubled to $94 million fueled by growth in its hiring and marketing business segments. The company plans on using the proceeds for general corporate purposes, including further expansion of product development.

According to the SEC filing, LinkedIn operates a network of over 100 million members in 200 countries or territories, and as of March 31, more than half of the registered user base hailed from outside the United States. During the second half of 2010, LinkedIn averaged more than a million new members every 10 days. The site generated over 2 billion people searches in 2010 and hosted nearly 5,000 companies through LinkedIn's job postings, while an additional 33,000 customers placed text and display advertisements.

Upon completion of its offering, LinkedIn will become the first publicly traded US based social network. The creation of JPMorgan's $1.2 billion social media fund and the success of offerings by companies like China's Renren (NYSE:RENN) serve to show that interest in these networks is at an all time high. The result of LinkedIn's offering may provide insight into the value of other notable social networking domains, such as Twitter and Facebook.

LinkedIn is the latest (and largest by deal size) venture capital-backed company to file for an IPO this year as sponsors look to capitalize on an increasingly active IPO market. LinkedIn's investors include Sequoia Capital (18% post-IPO stake), Greylock Partners (15%), and Bessemer Venture Partners (5%). Other notable venture capital-backed companies in the pipeline include Bright Source Energy, Pandora Media (NYSE:P), and Zillow (ZLOW). Of the 59 total IPOs completed this year, 24 have been venture capital-backed. These deals raised over $2.9 billion (15%) of total U.S. IPO proceeds, and earned investors an average return of 21%.

LinkedIn plans to list on the New York Stock Exchange under the symbol (LNKD). J.P. Morgan (NYSE:JPM), BofA Merrill Lynch (NYSE:BAC) and Morgan Stanley (NYSE:MS) are the lead underwriters on the deal, which is expected to price during the week of May 16th.