Analyst: LinkedIn Stock Is Likely to Pull Back Sharply
The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.
LinkedIn (NYSE:LNKD) priced a follow-on equity offering of almost 5.4 million Class A shares at $223 per share (a 7 percent discount to Wednesday’s closing price) for a total offering amount of roughly $1.2 billion. The underwriters have the option to purchase an additional 807,174 shares. The offering should close September 10.
The offering’s timing suggests management would like to take advantage of LinkedIn’s record-high stock price, perhaps to provide liquidity for an acquisition or further expansion. LinkedIn shares reached a new all-time high in August of $247.98 in intraday trading. The company’s shares are up well over 100 percent year to date.
The size of the offering makes us believe that a potential acquisition is likely, as LinkedIn does not have any debt and its pro forma cash balance is much higher than what we believe is required for working capital purposes. The prospectus states potential use of proceeds as general corporate purposes, including working capital, further expansion of product development and field sales organizations, international expansion, general and administrative matters, and capital expenditures. We note that LinkedIn look-alike Xing (a public company) operates in Europe and has managed to maintain significant market share there.