Gustavo Ballvé on May 19th, 2011
Corporate Governance, Food for thought, Industries, Investment Themes, Media, Mental models, Portfolio Management, Risk management, Signal or Noise, Tech

We can’t avoid mentioning LinkedIn’s IPO today. Came out at US$ 45 a share, went to heights of US$ 105 a share (a 133% increase!!) and closed at US$ 94.25. It had US$ 15.4mm in net income in 2010 (on revenues of US$ 243mm) and promised nothing better (profit-wise) for 2011, so don’t bother with P/Es. However, we’re not here to judge the post-IPO valuation (despite their complicated corporate governance provisions…). We’re linking to a LinkedIn linkfest at Abnormal Returns that should give readers plenty to chew on – and to highlight the potential conflicts of interest in the IPO realm between the sellers and investment bankers: while IPO pricing is truly an art form and some money must be left on the table, we agree with Henry Blodget in this article that this case was clearly a mess.

A note on Abnormal Returns: despite the obvious differences in investment horizons, it’s a great place to look for interesting links. We really like the “linkfest” format that allows us to read contradicting opinions and ultimately better form our own through the analysis, research and discussion of these building blocks/ hypothesis. The other advantage of occasionally reading a source not traditionally in our radar is to diversify inputs and to understand what other players in the market are looking at – what are their key issues regarding the company or sector. If one can filter the noise, of course.

Finally, one comment on the current valuation:

“The four most expensive words in the English language are ‘This time it’s different‘.” – Sir John Templeton.

And another piece on LinkedIn’s weird CG.

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