LinkedIn's IPO will be priced at $45 per share, which values the entire company at close to $4.3 billion.
It's the biggest tech IPO since Google went public in 2004. However, when Internet website Facebook eventually goes public, it's expected to dwarf the size of LinkedIn's IPO.
LinkedIn calls itself the World's Largest Professional Network, a title it rightly deserves. However, is it worth $4.3 billion?
Below are some points to consider.
- LinkedIn is profitable and its revenues doubled in 2010. However, at $45 a share, its P/E ratio is 264. Assuming LinkedIn's revenues double in 2011, the P/E ratio is still 132. Meanwhile, investors can own Apple and Google at less than 25 times the earnings.
- LinkedIn's US traffic is about 37 million visitors per month, making it the 26th most visited website in the US. It also claims 100 million registered users. This compares to monthly visitors of 150 million for Google and 139 million for Facebook, which boasts of over 500 million active users.
- Facebook's valuation in the secondary market is $50 billion. Google is valued at $170 billion. Keep in mind that Google is much more than just a search engine while LinkedIn is pretty much just the linkedin.com website.
- LinkedIn has the most attractive demographics among the biggest websites because their audience is mostly white collar professionals with higher than average income. However, with the exception of HR professional, people generally don't spend too much time on LinkedIn. Contrastingly, people spend a lot of time on Facebook and Google.
- LinkedIn has more information on its users than Google but less information than Facebook.
- LinkedIn can charge HR professionals and recruiters for subscription accounts. However, there are only so many HR professionals in the US.
- LinkedIn can conceivably break into the career development / job search industry, which could potentially be very lucrative.