LinkedIn files a secondary offering for 4.2 Mn shares worth $1 billion

Linkedin-logoLinkedIn has recently filed a secondary offering of approximately 4.2 Mn shares to raise around $1 billion at an assumed purchase price of $240 per share, the last reported sale price on the New York Stock Exchange on August 30, 2013. However, as per the latest report, the new offering will be priced at $223 per share.

The company will be utilizing the raised funds to increase working capital, product & infrastructure development and for strategic acquisitions or further investments.

As per the filing, the company founders will continue to control its operations with co-founder Reid Hoffman holding 60.2 percent of the voting power of outstanding capital stock. Also, the company has provided its underwriters J.P. Morgan, Morgan Stanley, Goldman Sachs, Merrill Lynch and Pierce, Fenner & Smith, an option for a period of 30 days to purchase 15% of the issued stock valued at around $150 Mn.

The company’s decision to sale its stock has driven mixed reactions from the industry analysts and investors. The decision is questionable since in a country like US where interest rates are even less than they were three years ago, borrowing is much cheaper than equity.

As per the reports, LinkedIn is currently having a strong financials with Q2, 2013 revenues reaching $363.7 Mn. With LinkedIn looking for further expansion following the acquisition route, this might slow down its growth. Also, this would lead to the dilution of the investor’s current shareholdings.

However, as per the experts, with five fold increase in the stock price since the launch of its IPO in 2011, this is really cheap money for LinkedIn, as selling just less than half portion of stock than at its IPO, can raise twice the money now without much diluting existing shareholders stock.

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LinkedIn is the world’s leading social networking site for professionals launched in 2003 and is currently having more than 238 million members in over 200 countries and territories. The company generates revenue from enterprises and professional organizations by selling its Talent Solutions, Marketing Solutions and Premium Subscriptions.

From 2008 to 2012, LinkedIn’s annual net revenue grew from $78.8 million to $972.3 million, which represents a compounded annual growth rate of approximately 87%. The company currently faces competition from companies such as, Xing (Professional Networks); Monster, CareerBuilder, and solutions), etc.

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