LinkedIn Cites Blocking of Website in China as New Risk in IPO Prospectus

LinkedIn Corp., the largest professional-networking portal, said the possibility that China may bar access to its website poses a new risk to investors in its initial public offering.

A block by China is among circumstances under which “the value of our network could be negatively impacted,” LinkedIn said in an updated prospectus filed March 11. The company’s Jan. 27 offering document contained no such reference to China.

“The government of the People’s Republic of China recently blocked access to our site in China for a short period of time,” the latest filing said. “We cannot assure you that the Chinese government will not block access to one or more of our features and products or our entire site in China for a longer period of time or permanently.”

LinkedIn’s service was disrupted in China for more than 24 hours Feb. 24-25 after user postings supported calls for protests in the Asian nation. China, the world’s largest Internet market with 457 million Web users, bans pornography, gambling and content critical of the ruling Communist Party. It already blocks websites run by Facebook Inc., Twitter Inc. and Google Inc. (GOOG)’s YouTube.

“It’d be difficult to commit to absence of politically sensitive messages from users of the platform unless LinkedIn would be willing to monitor and censor user posts,” Andrey Glukhov, a New York-based Internet analyst at Brean Murray Carret & Co., said in an e-mail today.

Discussion Group

LinkedIn has had no contact with government officials in China about the interruption in service last month, company spokesman Hani Durzy said today in a telephone interview.

On Feb. 23, a LinkedIn user identified as “Jasmine Z” set up the “Jasmine Voice” discussion group on the site to discuss pro-democracy protests in the Middle East and their relevance to China. The user said Jasmine Z was “dying for democracy, freedom and justice in my homeland.”

Those postings have since been deleted. As of today, the LinkedIn site still features a group called “I support Jasmine Revolution in China,” which has three members and no postings.

LinkedIn, based in Mountain View, California, is seeking an IPO to raise as much as $175 million in what will likely be the first public offering of a major U.S. social-networking site. The company hired Morgan Stanley (MS), Bank of America Corp. and JPMorgan Chase & Co. (JPM) to lead the sale.

LinkedIn more than doubled sales to $243 million in 2010, from $120 million the previous year, according to the filing. The company reported net income of $15.4 million, compared with a loss of $4 million for the year-ago period.

Overseas Markets

The company, which has more than 90 million users, said 27 percent of sales last year were outside the U.S. The filing didn’t provide the number of users in China.

LinkedIn is now available in six languages: English, French, German, Italian, Portuguese and Spanish. Members can also create profiles in up to 41 languages, including Chinese, Shannon Stubo, a company spokeswoman, said in a Feb. 23 e-mail.

The question of whether to enter the China market is “complicated and not something that we take lightly,” Stubo said at the time.

“We have a program of local language rollouts which is in line with our global growth,” Stubo said in the e-mail last month. “We’re focused on getting it right. We’re keeping an eye on China and LinkedIn’s growth in that country.”

China Users

Even without a local site, the company has made headway with Chinese companies, including Huawei Technologies Co., the nation’s largest maker of equipment for mobile-phone networks. As of today, Huawei had 15 jobs posted on LinkedIn, and there were more than 17,080 users on the site registered as Huawei employees. That’s equal to about 16 percent of the company’s total of 110,000 workers.

As LinkedIn doesn’t currently have commercial activities in China, there wouldn’t be an immediate financial impact if service was blocked, said Bill Bishop, a Beijing-based independent media consultant. The issue may still raise investor concern over its future potential, he said.

“It’s never good to be blocked from the largest market in the world,” Bishop said. “Investors may start taking some of the boilerplate about regulatory risk as more than just boilerplate.”

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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