LinkedIn Seeks $175 Million in Initial Share Sale

LinkedIn Corp. plans to raise as much as $175 million in what’s likely to be the first public offering for a major U.S. social-networking site.

LinkedIn, the largest professional-networking website, hired Morgan Stanley, Bank of America Corp. and JPMorgan Chase & Co. to lead the offering, according to a filing today with the U.S. Securities and Exchange Commission. The company didn’t specify how many shares it would offer or at what price.

The social-networking site could draw strong demand in the public markets because it has steadily boosted sales from advertising, subscriptions and hiring services, said Tom Taulli, an independent technology analyst. The company was profitable in the nine months that ended in September and its sales more than tripled from 2007 to 2009, LinkedIn said in its filing.

“There’s a lot to like if you’re an investor,” said Taulli, who is based in Los Angeles. LinkedIn is “growing quickly, it has multiple revenue streams and there’s global potential here,” he said.

Biggest shareholders include co-founder Reid Hoffman and his family and trust, with 21 percent; Sequoia Capital, with 19 percent; Greylock Partners, which holds 16 percent; and Bessemer Venture Partners, with 5.1 percent. LinkedIn Chief Executive Officer Jeff Weiner owns 4.1 percent.

Some of the shares sold in the public offering will be from existing shareholders and some stock will be issued and sold by Mountain View, California-based LinkedIn, according to a post on the company’s blog, which didn’t specify how many shares would be newly issued.

Sales Almost Double

For the nine months ended in September 2010, net income attributable to common shareholders was $1.85 million, LinkedIn said in the filing. Revenue was $161.4 million, almost double the year-earlier period’s $80.8 million in sales. Total revenue in 2009 was $120.1 million, and the company had $89.6 million in cash and equivalents as of Sept. 30, 2010.

LinkedIn may lead the way for a crop of fast-growing Internet companies expected to sell shares to the public this year or next. Daily-deal site Groupon Inc. is in talks with banks about a public offering, while Facebook Inc. may wait until 2012 to hold an IPO, three people familiar with the matter said last year.

“This is just one of what we view as dozens of high- quality private companies that represent strong venture capital- backed, technology IPO candidates,” said Paul Bard, director of research at Greenwich, Connecticut-based IPO researcher Renaissance Capital LLC. “You’re going to see momentum continue, and we could end up with some pretty big numbers in terms of IPOs in 2011.”

Personal Profiles

LinkedIn has more than 1,000 employees and 90 million users in more than 200 countries. Members use the site to search for jobs, recruit employees and find industry experts. While users can create personal profiles for free, LinkedIn introduced paid subscriptions in 2005, giving recruiters more access to job candidates and providing business professionals ways to communicate with one another. The company also makes money by selling ads on the site.

LinkedIn is dwarfed by Palo Alto, California-based Facebook, the most popular social network, which has more than 500 million users.

Surging Valuation

As LinkedIn’s membership has grown, investment firms have been clamoring for a piece of the company.

Tiger Global Management LLC, a hedge fund founded by Chase Coleman, paid $20 million for a stake in the company in July, at a valuation of about $2 billion, according to two people familiar with the matter. SharesPost, a private exchange, is now trying to auction LinkedIn shares at a valuation of almost $3 billion, three people familiar with the matter said last week.

Pricing of LinkedIn’s stock in its IPO won’t be affected by trading on speculative markets for private company shares, the company said in its SEC filing.

LinkedIn was introduced in 2003 by former PayPal Inc. executive Hoffman, 43, and received its first round of funding that year from Sequoia, the venture firm behind Google Inc. and Yahoo! Inc. Sequoia’s Mike Moritz is on LinkedIn’s board. The company has raised more than $100 million from firms including Greylock, Bessemer and Bain Capital Ventures.

On Jan. 25, in the first venture capital-led U.S. IPO of 2011, Web content company Demand Media Inc. sold 8.9 million shares at $17 each after originally offering 7.5 million shares for $14 to $16 apiece. New York-based Goldman Sachs Group Inc. and Morgan Stanley arranged the IPO.

Allen & Co. and the investment banking division of UBS AG are also working on the LinkedIn share sale.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Douglas MacMillan in San Francisco at Dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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