LinkedIn IPO: Predictions

I wrote earlier about LinkedIn and raised questions about a social media bubble. Here we are a few months later and LinkedIn is expected to start trading Thursday morning on the New York Stock Exchange under the symbol “LNKD”.

Reports are showing that the asking price has gone as high as $45 per share. At that price LinkedIn would have a market value of over $4 billion, which is more than 17 times the value of its revenue in 2010.

So what do I think about the coming IPO?

I’ve said it before, and I’ll say it again, I think it will be a huge bubble. I just can’t see the long term business model they have so far revealed being very profitable.

Sure they are projecting themselves to have up to $500 million in revenues for 2011, but they also expect to not make a profit due to expansion, new products, and shoring up against competition.

I also see somewhat limited potential for growth. Two-thirds of LinkedIn’s revenue comes from fees required for greater access to the site and more information from profiles. That already shows that most of their business comes from specialized tasks and not from ad revenue. Unless they have something spectacular planned I don’t see my opinion changing much.

As for the IPO, I think the price will go up initially as there will be a frenzy to jump in while the price is “low.” Once everything settles down I think the price will slowly drift down as people start to realize the low profit margins the business model LinkedIn is using will generate.

This isn’t exactly a bold prediction either, as many others are having trouble seeing the growth and profitability potential for LinkedIn.

What do you think of LinkedIn’s IPO and future?

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  1. […] by Gian Sorreta on Thursday, June 9, 2011 · Leave a Comment  Three weeks ago I wrote my predictions on how I thought LinkedIn’s IPO would pan out. I will admit, while the prediction itself was […]

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