LinkedIn (NYSE:LNKD), which operates a social network for professionals, certainly is one of the year�s top IPOs. In mid-May, the company came public and saw its shares surge as high as 109% during the day. But since then, LinkedIn’s stock performance has been extremely volatile. LNKD is down about 3% since its IPO, and just last week, the shares fell 9.7%.
This drop came despite LinkedIn’s expectation-beating third-quarter report. Revenues surged 126% to $139 million, and the number of registered users increased by 63% to 131 million. The company adds about two members every second.
LinkedIn has been aggressive in expanding into foreign markets. And the company also has experienced lots of growth from the mobile platform. Page views are up 400% over the past year and account for 13% of overall member visits.
So with all the good news, why are investors skeptical? It really has little to do with the fundamentals of the business, which, all in all, should continue to be strong. In fact, LinkedIn raised its full-year revenue guidance to $508 million to $512 million, up from the prior forecast of $475 million to $485 million. Investors instead are concerned about the large amount of stock that will come onto the market.
LinkedIn plans to issue $500 million in shares in a secondary offering. While the timing is uncertain, it definitely will weigh on the stock price. Also, LinkedIn�s lock-up agreements will expire Nov. 21. This means the company�s employees and investors will have the right to sell their shares. In light of the fairly high market cap — at $8 billion — there is likely to be lots of selling. Why not snag some big gains?
Keep in mind that only about 9.5% of the outstanding shares are trading on the market now. But with the lock-up expiration and secondary offering, the number of shares could easily double in the next few months, putting enormous pressure on the stock price. Short sellers are alert to this, as their positions already represent 31% of the float.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
No comments:
Post a Comment