LinkedIn looks for boost with IPO

LinkedIn, the business-focused social network, has filed registration documents for an initial public offering that could raise $175m, as it seeks to take advantage of investor appetite for internet companies even before it shows sustained profitability.

LinkedIn would join Skype and Kayak among recent web companies that have signalled their intention to head to the public markets. Facebook and Groupon have also been the subject of considerable speculation.

The LinkedIn prospectus filed on Thursday said the company’s revenue doubled in the first nine months of 2010 from the same period a year earlier, to $161m, though it expects that rate of increase to slow.

It reported $1.9m in profit attributable to common shareholders during that period and said it did not expect to be profitable in 2011 on a GAAP basis.

LinkedIn earns money from premium subscriptions, recruiting deals and marketing, each contributing roughly a third of the company’s revenue.

The company said it had more than 90m registered users in more than 200 countries and territories.

Even after the IPO, the company is likely to be controlled by one man, Reid Hoffman, co-founder and chairman. He and others have a separate class of stock with 10 times the voting rights of the common shares to be sold publicly.

As of December, LinkedIn was valued at $1.575bn in the private markets, with a multiple of 13.4 times its estimated 2011 earnings before interest, taxes, depreciation and amortisation of $114m, according to Nyppex, the secondary market for private shares.

Companies are usually valued at a discount in private markets due to less disclosure of financial information and less liquidity of the shares.

Technology groups’ share of public listings in the US declined after the financial crisis, but there could be a rebound in 2011 as confidence in the economy improves.

Last year, shares of Group, a Russian company that invested in Facebook, Groupon and Zynga, jumped 41 per cent in an IPO on the London Stock Exchange. Shares of Demand Media, a content creator, soared 33 per cent in first-day trading to $22.65 after an IPO on Wednesday.

Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase were chosen as the LinkedIn underwriters, with Allen & Co and UBS joining the deal.

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