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LinkedIn Wants More Cash, Offers to Sell $1.15B Worth of Stock
- peterjancelis 13y agoAt a P/E of 935, I would also sell all the shares I could. http://finance.yahoo.com/q?s=LNKD http://finance.yahoo.com/q?s=LNKD
- arbuge 13y agoI 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.
- rthomas6 13y agoSo... why would it be a bad idea to short the stock now? Somebody talk me out of it before I make an expensive mistake.
- taway2012 13y agoThis is why: the market can stay irrational longer than you can stay solvent. https://duckduckgo.com/?q=The+market+can+stay+irrational+longer+than+you+can+stay+solvent https://duckduckgo.com/?q=The+market+can+stay+irrational+lon...
- mathattack 13y agoIt can be very hard to time, and you have to pay dividends/interest while shorting. Lots of pain for people who shorted tech in 1998. Or financials in 2005. No limit to your downside.
- pbreit 13y agoShorting excellent companies that make lots of money is generally a bad idea.
- MichaelGG 13y agoThey made $3.7M last quarter. That's not "lots of money" for a $32B market cap.
- pbreit 13y agoThose are gaap earnings which are of minor relevance for high growth companies prioritizing usage and revenue expansion. The company made $363 million in revenues last quarter.
- jwheeler79 13y agoGAAP earnings == earnings in the context of the parent posts. Just because you slap a fancy acronym in front of the word "earnings" doesn't make it any different. However, revenue != profit. And, a 1% profit margin is pretty shitty friend.
- pbreit 13y agogaap earnings are not the same as earnings and are frequently mis-leading for this type of company. A small profit margin is almost devoid of meaning for a company not trying to generate profits.
- MichaelGG 13y agoOK so I'm not a finance guy at all, but can you explain what I'm not getting: http://www.google.com/finance?q=NYSE%3ALNKD&fstype=ii http://www.google.com/finance?q=NYSE%3ALNKD&fstype=ii 363M revenue. Minus a ton of things for operating income of 8M. Then tax brings it to 3.7M. On what basis are we supposed to think LinkedIn is suddenly going to eliminate > $300M of quarterly costs? If you do the "1 times revenue" (so about 1BN) that's still not close to being worth 32B. I asked the same things when I was 18 in the dot-com boom and got hand-wavy responses and people talking about eyeballs and stuff. Why is this fundamentally different? I understand if it's too much to explain in a comment, but could you link to some introduction that explains why a company's costs should be ignored? Also, why the stock would go up when they meet expectations? If you bought into the high P/E at $100 on the logic of "yeah the PE is high, but it's growing into it" then you'd expect the PE to lower as they meet their goals. Instead the PE stays around the same area and the stock goes up. That does not sound rational. Edit: Like, 1% profit margin, so even if they magically multiply that by 10 or 20 times, that'd still mean a PE in the hundreds.
- MichaelGG 13y agoHeh, 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.
- dangoldin 13y agoYou 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.
- mathattack 13y agoI 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)
- acchow 13y agoAbsolutely. 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.
- diziet 13y agoIn the case of LinkedIn, the company is both a network effect & data company.
- lifeisstillgood 13y agoAll 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.
- Apocryphon 13y agoDon't they have a more cohesive and profitable business model than Facebook?
- veemjeem 13y agoEven Facebook has a better model as their P/E ratio is only 200 or so.
- xxpor 13y agoSaying the value of a biz model is inversely proportional to P/E is ridiculous.
- lifeisstillgood 13y agoSurely not - P/E ratio is a guess at future profits factored in now. If a company is demonstrating real profits now and so has a viable business model, it will be easier to guess (project?) future profit and so P/E ratio will lower I suspect this only works for P/E ratios above one order of magnitude - when dealing with companies that obey laws of gravity other factors come in to play (I mean seriously 900x earnings. That's insane).
- xxpor 13y agoSo you're agreeing with me. I'm arguing it has minimal correlation. If high P/E = future profits, the model is useful. Low P/E (if they are making a healthy profit) = the model is useful. It's the edge case of low P/E and low profits that indicates a non-valuable biz model.
- namenotrequired 13y agoI'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.
- seiji 13y agoStop giving them your money. Let them collapse like capitalism intends.
- minimax 13y agoDoes this dilute existing LinkedIn shareholders?
- swr 13y agoYes. 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/1271024/000104746913008826/a2216551zs-3asr.htm#ca46401_prospectus_summary http://www.sec.gov/Archives/edgar/data/1271024/0001047469130...
- xxpor 13y agoMathematically, their price should go down exactly (due to this announcement) (1 - Old # of outstanding shares / New # of outstanding shares)%
- Pxtl 13y agoLinkedIn is doomed the moment real competition appears. People only use it while grimacing with disgust.
- EGreg 13y agoWhy? I like it.
- BlackDeath3 13y agoI'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).
- flaugh 13y agoThis is a good example of why everyone who has any sense dislikes the company: http://community.linkedin.com/questions/8947/how-do-i-prevent-linkedin-from-spamming-everyone-i.html http://community.linkedin.com/questions/8947/how-do-i-preven... Long story short: They're slimy.
- EGreg 13y agoOK but once you're in already, and you aren't connecting your address book (hmm, what else are they going to do with it?) what sucks about LinkedIn so much relative to other social networks?
- ser0 13y agoI 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.