LinkedIn Wants More Cash, Offers to Sell $1.15B Worth of Stock (opens in new tab)

(allthingsd.com)

34 pointsjoshuaxls12y ago46 comments

46 comments

At a P/E of 935, I would also sell all the shares I could.

http://finance.yahoo.com/q?s=LNKD

I came here to say this. When the market places a crazy value on your stock price, it behooves you to take advantage if you really have a fiduciary duty to maximize shareholder value.

Same principle as buying up your shares on the cheap if the market beats them down unwisely.

rthomas612y ago

So... why would it be a bad idea to short the stock now? Somebody talk me out of it before I make an expensive mistake.

taway201212y ago

This is why: the market can stay irrational longer than you can stay solvent.

https://duckduckgo.com/?q=The+market+can+stay+irrational+lon...

1 more reply

MichaelGG12y ago

Heh, I had the same idea and lost a bit (if I had a proper account I woulda made enough on the volatility but that's another issue). A year ago I'd have though that by late 2013 LNKD'd would have fallen.

Look what happened last month. P/E insane, stock at $200. LNKD releases decent numbers ("as expected, LNKD exceeded expectations"), and the market decides "yeah let's just keep that P/E at the same spot".

As someone else wrote, the market can stay irrational longer than you can stay solvent. Maybe if LNKD releases a "met expectations" or "missed by 1%" people will realise a 900+ PE is ridiculous and it'll tank.

Meanwhile, LNKD would be idiotic to not sell off some more shares.

dangoldin12y ago

You can consider buying a put option as a form of a short. The problem there is you need to deal with the likelihood of your option expiring worthless. But your downside becomes limited.

pbreit12y ago

Shorting excellent companies that make lots of money is generally a bad idea.

2 more replies

acchow12y ago

Absolutely. When choosing between network effects vs. data, I will invest in a data company every time. Data seems to pay off in totally unforeseeable ways far into the future.

Take, for example, YouTube. Google paid $1.65bn for a company that didn't have a way to make money, but it generates massive amounts of human-labelled data. Now, a decade later, with Google's distributed artificial neural net, YouTube is granting Google sight. Google can see.

Yes, this is proof by anecdote - makes me cringe too. But bet on data. You can make lots of money.

diziet12y ago

In the case of LinkedIn, the company is both a network effect & data company.

mathattack12y ago

I was thinking similar. It would take a LOT of earnings to come up with the cash that selling that equity would provide. (3-4 years of forward earnings, 30-40 of trailing, unclear on cash)

Pxtl12y ago

LinkedIn is doomed the moment real competition appears. People only use it while grimacing with disgust.

ser012y ago

I agree, I think LinkedIn's value for network participants is very low. For someone trying to find information it is even lower. The one useful thing I see from it now is that it helps confirm someone's claim that they worked somewhere; through checking of people in their network.

However, things like promoting of skills, constant 'do you know ...' emails, and other meaningless profile building tasks that results in engagement with the website, appears to be little more than an exercise in cheap self promotion.

Perhaps I'm not the intended audience, but I find that marketing types tend to be the most active users on LinkedIn. What that says about the nature of the service, I'm not too sure at this point.

porsupah12y ago

I can only agree. Specifically, their job recommendations repeatedly insisted (until I finally got around to muting them) that because I'd had a job in a particular city some years ago, clearly that made me an ideal match for positions in entirely different fields.

Seriously, if your company's raison d'etre is employment, and you're giving equivilancy to a long-ago location as to someone's actual field of expertise.. I'm, generously, hoping things improve.

For many people, jobhunting can be a soul-crushingly tedious, utterly unrewarding experience, and LinkedIn's seemingly unaware and uninterested, preferring self promotion with all the inerrant accuracy of AdWords.

mathattack12y ago

I think it's a great product. I check it before every business meeting.

crazypyro12y ago

Were people not saying this about facebook once?

EGreg12y ago

Why? I like it.

BlackDeath312y ago

I'm curious about this as well. I don't use the site, but I see a lot of hate toward it (much of it seemingly unexplained).

1 more reply

lifeisstillgood12y ago

But it is the very definition of a network effect - I think competing with it is a hiding to nothing - I suspect that the best approach is to commoditise it - one of its plugins will become so popular that it essentially takes over simply using the LinkedIn API as a convenient backend

namenotrequired12y ago

I'd be very careful to buy stock at LinkedIn. I'm not surprised there's high engagement as LinkedIn is full of dark patterns designed to drive engagement but this is bound to backfire sooner or later, many of which I'm sure you've all read about here already if not experienced. There are only so many frustrations users are willing to put up with.

lifeisstillgood12y ago

All I can think of is walled gardens need upkeep

LinkedIn is the most amazing business node graph out there - for a professional person online it has everybody and uptodate. But there is a wafer thin business model if they played their hand brilliantly - and they play it like a drunk Captain Hook trying second dealing in Vegas.

I just hope that when / if it all collapses we can club together and transfer out the edge connections.

Apocryphon12y ago

Don't they have a more cohesive and profitable business model than Facebook?

veemjeem12y ago

Even Facebook has a better model as their P/E ratio is only 200 or so.

1 more reply

xutopia12y ago

Can you explain what you mean? It's not obvious to me from my perspective.

dredmorbius12y ago

If you build a closed ecosystem, you and you alone are responsible for its value. As with other forms of leverage, you win on the upside, but there's also a lot to lose going down. LinkedIn is a closed, walled garden. It's gotten increasingly obnoxious (enough so that I've pared my legitimate profile down to its bare bones, and have a spoof one I use for research). And, well, we've seen any number of walled gardens implode spectacularly.

Logged into MySpace recently?

unono12y ago

Could linkedin use it's data for nefarious purposes? Yes.

Could some professionals ask to be compensated for being on the network? Yes.

Have the professionals on linkedin realized the above? No.

1 more reply

minimax12y ago

Does this dilute existing LinkedIn shareholders?

swr12y ago

Yes. According to the prospectus[1] 4,165,972 shares new shares are being issues raising the outstanding Class A shares to 97,732,877.

This is part of the reason there was a bit of a sell off after the announcement.

[1] http://www.sec.gov/Archives/edgar/data/1271024/0001047469130...

xxpor12y ago

Mathematically, their price should go down exactly (due to this announcement) (1 - Old # of outstanding shares / New # of outstanding shares)%

1 more reply

seiji12y ago

Stop giving them your money. Let them collapse like capitalism intends.

j / k navigate · click thread line to collapse

46 comments

peterjancelis12y ago

At a P/E of 935, I would also sell all the shares I could.

http://finance.yahoo.com/q?s=LNKD

arbuge12y ago

I came here to say this. When the market places a crazy value on your stock price, it behooves you to take advantage if you really have a fiduciary duty to maximize shareholder value.

Same principle as buying up your shares on the cheap if the market beats them down unwisely.

rthomas612y ago

So... why would it be a bad idea to short the stock now? Somebody talk me out of it before I make an expensive mistake.

taway201212y ago

This is why: the market can stay irrational longer than you can stay solvent.

https://duckduckgo.com/?q=The+market+can+stay+irrational+lon...

1 more reply

MichaelGG12y ago

Meanwhile, LNKD would be idiotic to not sell off some more shares.

dangoldin12y ago

You can consider buying a put option as a form of a short. The problem there is you need to deal with the likelihood of your option expiring worthless. But your downside becomes limited.

pbreit12y ago

Shorting excellent companies that make lots of money is generally a bad idea.

2 more replies

acchow12y ago

Absolutely. When choosing between network effects vs. data, I will invest in a data company every time. Data seems to pay off in totally unforeseeable ways far into the future.

Yes, this is proof by anecdote - makes me cringe too. But bet on data. You can make lots of money.

diziet12y ago

In the case of LinkedIn, the company is both a network effect & data company.

mathattack12y ago

I was thinking similar. It would take a LOT of earnings to come up with the cash that selling that equity would provide. (3-4 years of forward earnings, 30-40 of trailing, unclear on cash)

Pxtl12y ago

LinkedIn is doomed the moment real competition appears. People only use it while grimacing with disgust.

ser012y ago

Perhaps I'm not the intended audience, but I find that marketing types tend to be the most active users on LinkedIn. What that says about the nature of the service, I'm not too sure at this point.

porsupah12y ago

Seriously, if your company's raison d'etre is employment, and you're giving equivilancy to a long-ago location as to someone's actual field of expertise.. I'm, generously, hoping things improve.

mathattack12y ago

I think it's a great product. I check it before every business meeting.

crazypyro12y ago

Were people not saying this about facebook once?

EGreg12y ago

Why? I like it.

BlackDeath312y ago

I'm curious about this as well. I don't use the site, but I see a lot of hate toward it (much of it seemingly unexplained).

1 more reply

lifeisstillgood12y ago

namenotrequired12y ago

lifeisstillgood12y ago