MorningWord 9/4/13: $LNKD Ensures Survival When The Web 3.0 Nuclear Winter Arrives

by Dan September 4, 2013 9:24 am • Commentary

MorningWord 9/4/13:  Last night LNKD filed a prospectus (here) to sell about 4 million shares of common stock, that should equal close to $1 billion.  After a quick perusal of the offering document I found it interesting (sarcasm font broken) that, under the expected uses for the cash, nowhere did it mention that it was quite possibly going to be the very thing that keeps their stock afloat if their members ever get sick of all those invite requests, professional endorsements and other annoying and generally useless messages.  Ok, that may be a bit much, but I think you get the point. Things appear to be going so well that the company, their bankers and investors are willing to buy one quarter of the dollar amount that was priced on their IPO more than 2 years ago after the stock has gone up 5 fold.

But we do know how this ends, we just don’t know when, and I assume that this one decision may be the most important decision in the stock’s history (not relating to their business).  See, when things are going so well management, bankers and investors alike think that it will never end, be worried.  Even for all of those Web 1.0 companies that have proven to be long term winners (AMZN, EBAY & YHOO) all saw peak to trough declines from the bubble highs of at least 80%.   It won’t be different this time around, and I suspect someone clued in the folks at Linkedin how the whole web stock sensation thing works.

I would also add that tech companies that raise cash at opportune times rarely regret, look at BBRY for example, if they had not sold close to $1.7 billion worth of stock to willing shareholders in 2 secondary offerings in 2000 and 2004 the stock would be trading at a baby’s hat size at the moment.  It is the only thing keeping the stock where it is at the moment.

I have no idea whether LNKD’s sale at such lofty levels is a good buy, but I have a fairly good idea that most hedge funds will sell their allocations almost (or maybe even before they get their allocations), and other than some dilution to existing holders, the company has ensured some form of future existence if and when the Web 3.0 nuclear winter comes.