LinkedIn Pops 84%, Opens Door for Social Networking Backlog

May.19.11 | About: LinkedIn (LNKD)

LinkedIn (NYSE:LNKD), the world's leading online professional network with more than 100 million members, raised $353 million on Wednesday by offering 7.8 million shares at $45, the top end of its upwardly-revised $42 to $45 range. The company had originally planned to offer the same number of shares at a range of $32 to $35. With a market capitalization of over $4 billion, it is most valuable U.S. Internet IPO since Google's debut in 2004.

Since its launch in May 2003, LinkedIn has grown into the world's largest online professional network, connecting more than 100 million registered members in 200 countries. By creating a free profile, LinkedIn members can search and communicate with business contacts, learn about career opportunities, join industry groups, research organizations and share information. With an expanding user base and rising member engagement driving more data onto its platform, the company has established three fast-growing and high-margin revenue streams: enterprise recruiting solutions, targeted advertising and premium subscriptions.

For the March Q1 2011, revenue grew 110% to $94 million, primarily as a result of 174% growth in the hiring solutions segment. Advertising sales and premium subscriptions grew at 95% and 47%, respectively, as total registered members grew 58% to over 101 million. However, EBITDA grew only 46% to $13 million as a result of a 181% increase in sales and marketing spend related to the buildout of its sales force. For the last twelve months, revenue and EBITDA were $292 million and $52 million, respectively.

LinkedIn opened for trading on the NYSE at $83, up 84% from its IPO price. That return will give it the largest first day pop of a recent US IPO since OpenTable (NASDAQ:OPEN) closed up 60% in its first day of trading in May 2009.

Some of this year's IPOs have also seen sizable first day pop. China-based Qihoo360 (NYSE:QIHU) had a 135% return on its first day of trading. Car sharing network Zipcar (ZIP) closed up 56% from its IPO in its debut. Cornerstone OnDemand (NASDAQ:CSOD), a global provider of on-demand talent management software, had a 47% first day return.

A solid performance from LinkedIn, the first U.S. social media IPO, could pave the way for other social networking firms to take the IPO plunge. As mentioned in our 2010 Global Annual IPO review, the shadow IPO backlog contains names such as Facebook, Zynga and Groupon.