LinkedIn Said to Hire Banks to Advise on 2011 U.S. IPO

LinkedIn Said to Hire Banks to Advise on 2011 IPO
The headquarters of LinkedIn Corp. in Mountain View, California. Photographer: David Paul Morris/Bloomberg

LinkedIn Corp., the largest networking website for professionals, has hired banks to advise on an initial public offering this year, according to two people familiar with the IPO plans.

LinkedIn is working with Morgan Stanley, JPMorgan Chase & Co. and Bank of America Corp. to complete an IPO prospectus by the end of the first quarter, said one of the people, who asked not to be identified because the information is private. Shannon Stubo, a spokeswoman for LinkedIn, said “an IPO is one of many tactics that we could choose to pursue.”

An IPO would follow a $500 million investment in Facebook Inc., the most popular social network, by Goldman Sachs Group Inc. and Russia’s Digital Sky Technologies. Their stake valued Facebook at $50 billion, according to three people familiar with the matter. LinkedIn would be the first major U.S. social-networking website to do an IPO, giving it funds to take on its larger rivals in the industry.

“What the Goldman investment underlined is that there is a huge window of opportunity for other social networkers to make it to the market,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC, which oversees about $3 billion. “There will be much more investor interest, because they don’t have anywhere else to invest” in the publicly traded markets, he said.

Global Growth

LinkedIn, which has more than 1,000 employees, has grown to 90 million users in more than 200 countries, according to the company. Members use the site to search for jobs, recruit employees and find industry experts. The site is dwarfed by Facebook, which has more than 500 million users.

The IPO plans were earlier reported by Reuters.

Mountain View, California-based LinkedIn, founded by former PayPal Inc. executive Reid Hoffman in 2003, allows users to create and maintain profiles for free and charges for premium service. In 2005, LinkedIn introduced a subscription product to help recruiters find job candidates and communicate with them directly. Stubo, the spokeswoman, declined to say whether Hoffman is the controlling shareholder.

Jeff Weiner, a former executive vice president at Yahoo! Inc., joined LinkedIn in December 2008 and became chief executive officer in June 2009. LinkedIn is generating positive operating cash flow, which typically means a company has high enough sales to cover operating expenses and capital-spending needs, Weiner said in an interview last June.

Acquisition Plan

The company is seeking acquisitions to make its online networking tools more accessible on mobile phones and increase ways professionals can use the site, Weiner said at the time. He said the company was seeing rapid growth in Brazil, India, China, Italy and Spain.

In 2008, LinkedIn raised $76 million in financing from investors, including Bain Capital Ventures. The company’s other backers include Sequoia Capital, which funded Google Inc. and Yahoo, and Greylock Partners, which backed DoubleClick, the online advertising company.

LinkedIn and its bankers may beat Facebook to the public markets by a year or more. Facebook CEO Mark Zuckerberg is expected to put off an IPO until 2012 so he can focus on expanding the company, three people familiar with the matter said last year. Morgan Stanley and JPMorgan are based in New York, while Bank of America is located in Charlotte, North Carolina.

Tiger Investment

In July 2010, Tiger Global Management LLC, a hedge fund founded by Chase Coleman, paid $20 million for a stake in LinkedIn, valuing the company at more than $2 billion, two people familiar with the matter said at the time.

Venture capital-backed companies have registered with the Securities and Exchange Commission to raise a total of $2.86 billion in IPOs, 79 percent less than private-equity-owned companies, data compiled by Bloomberg show. While companies such as Palo Alto, California-based Facebook have increased in value by 50 percent or more in private trading on speculation they will go public, they have also shown they can raise capital without seeking an IPO.

Groupon Inc., the daily-deal coupon site based in Chicago, raised $500 million in financing, according to a filing with the SEC last week. It was part of a funding round that could raise $950 million.

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