As the highly anticipated LinkedIn IPO gets one step closer to the pricing Wednesday night, the price range was increased to $42-45, from the original range of $32-35. This hefty increase of 30% is an indication of strong investor demand for an offering that was described as multiple times oversubscribed early last week.
LinkedIn Corporation (LNKD) is now offering 7.84 million shares at $42-45. Of the 7.84M shares offered, 4.83M shares are primary shares from the company, and 3M shares are secondary shares offered by selling stock holders including Bain Capital Ventures, Goldman Sachs (GS), the Mcgraw-Hill Companies (MHP), and certain executive officers and directors. Investors Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together will own about 37.5% of the company post offering, are not selling in the IPO. At the midpoint of the new range, the company will have a market capitalization of just over $4 billion.
With more than 100 million members, LinkedIn is the largest professional social network on the Internet. They operate under a “freemium” business plan, where they allow members to share their professional identity, share information and connect to business contacts. The majority of their solutions are provided to members at no cost. They monetize their strategy through three business lines: Hiring solutions (which provides passive recruiting at scale); Marketing solutions (allowing enterprises and organizations to pursue B2B and mass marketing as well as branding opportunities); and Premium services (available to individuals as well as enterprises).
LinkedIn has grown rapidly from 2 million members in 2004 to over 100 million today. This membership spans across 200 countries and territories. Revenue has also grown rapidly from $78.8 million in 2008 to $243M in 2010. They have had seven consecutive quarters of accelerating top line growth.
The company is investing heavily for long term growth. While they were profitable in 2010, the company expects to have a loss in 2011 due to their aggressive investment in growth in 2011. This investment will go into: Infrastructure, increasing the sales force, product development, and international growth (launching new languages and sales offices).
As the social media craze sweeps across the U.S. and the rest of the world, LinkedIn is poised to take advantage as the first major U.S. based social network to launch their IPO in 2011. The increased range signals the robust demand on the offering, and the relatively small amount of shares offered will mare than likely make it very difficult for any but the largest of investors to receive an allocation at the IPO price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.