LinkedIn? How About TakenIn?
It's more than likely Warren Buffett would declare that LinkedIn is worth only a few dollars a share. Based on it's revenue and profit figures, what other conclusion is there? The company's prospects may suggest that revenue and net income will rise, but not at the speed of light, with is what the current stock price calls for. Thus, it's reasonable to assume the shares are headed for collapse as soon as it's possible to short them.
How to Cash in on LinkedIn
Friday, May 20, 2011
Start your own IPO and award yourself millions in options
— Quit your job.
You heard me. Quit your job, move to Silicon Valley, and start a venture to compete with LinkedIn (LNKD - News).
News from the initial public offering shows Wall Street is handing out free money again for dot-coms, and who knows how long it's going to last?
LinkedIn more than doubled on its stock-market debut, rising from $45 a share to $105 by early afternoon. That values the company at $10 billion.
That's equivalent to $130 for each of this company's 75 million monthly users. Hmmm. How long before a competitor offers the members, oh, $120 each to move? It won't even cost a penny. The new company can give the new members $120 ... in stock!
You think I'm kidding, but somewhere in an old email I still have a record of all the stock I "owned" in a free Web service that started up in London during the last dot-com bubble. The more I used it, the more "stock" I got. The IPO was going to make everyone rich.
LinkedIn, despite the hype, is primarily a service for hosting résumés. You can call it "networking" and "social media" and whatever you like, but half the company's revenues come from recruiters looking to trawl through all the résumés on the site.
How exciting is that? Last quarter, those revenues from recruiters came to $46.3 million.
That's 21 cents per LinkedIn user per month. Yes, you can see why this stock is being valued at $10 billion, can't you?
Another $28 million came from advertising. That's another 12 cents per user per month. Wow.
Online advertising. What a great business model.
This week's reaction to the LinkedIn IPO suggests the new dot-com mania may have some way to run. There's still a lot of skepticism about the Web out there, and that's bullish. Lots of people who "just don't get it." The new economy. The new world. Web 2.0. Web 3.0. It's not about earnings; it's about eyeballs!
Bubbles typically don't burst till the last bear turns bullish. The collapse of the last dot-com bubble was signaled weeks in advance, when the IPOs stopped popping on their debuts.
Cash in while you can. Resume-site.com? Resume-world.com? Resumeszone.com? GoDaddy says these domain names are all free, for just $12 a month. Or pick some goofy name out of a hat. But make sure to get out in time.
Be as shameless as you want. In the months leading up to the IPO, LinkedIn insiders awarded themselves millions of stock options at prices as low as $19.63 a share. They have now made $300 million just on the options they've awarded themselves this year!
And the great game continues. A public stock basically gives them their own currency with which to pay themselves. What a deal! The fine print of the LinkedIn prospectus shows management plans to issue millions more in stock and options to insiders — massively diluting current shareholders.
Meanwhile, if you are an investor in this IPO, please do the math.
LinkedIn is now valued at $10 billion. That's 660 times last year's net income of $15 million.
Apple (AAPL - News), by way of comparison, is at 16 times earnings.
Surely no one would invest in a high-risk stock like LinkedIn unless they expected strong capital gains (there are no dividends, naturally). But if you are hoping LinkedIn will rise by, say, 20% a year from here, be aware of what that would mean: In 10 years' time, it would be valued at $62 billion. (And that ignores potential dilution from new stock and options.)
If by then the stock were trading on a more reasonable multiple of, say, 20 times earnings, net income would have to be $3.1 billion.
How do you get from $15 million to $3.1 billion in 10 years? You grow earnings by 70% a year, every year, for a decade.
The chances of this happening? You make the call.
How to Cash in on LinkedIn
Friday, May 20, 2011
Start your own IPO and award yourself millions in options
— Quit your job.
You heard me. Quit your job, move to Silicon Valley, and start a venture to compete with LinkedIn (LNKD - News).
News from the initial public offering shows Wall Street is handing out free money again for dot-coms, and who knows how long it's going to last?
LinkedIn more than doubled on its stock-market debut, rising from $45 a share to $105 by early afternoon. That values the company at $10 billion.
That's equivalent to $130 for each of this company's 75 million monthly users. Hmmm. How long before a competitor offers the members, oh, $120 each to move? It won't even cost a penny. The new company can give the new members $120 ... in stock!
You think I'm kidding, but somewhere in an old email I still have a record of all the stock I "owned" in a free Web service that started up in London during the last dot-com bubble. The more I used it, the more "stock" I got. The IPO was going to make everyone rich.
LinkedIn, despite the hype, is primarily a service for hosting résumés. You can call it "networking" and "social media" and whatever you like, but half the company's revenues come from recruiters looking to trawl through all the résumés on the site.
How exciting is that? Last quarter, those revenues from recruiters came to $46.3 million.
That's 21 cents per LinkedIn user per month. Yes, you can see why this stock is being valued at $10 billion, can't you?
Another $28 million came from advertising. That's another 12 cents per user per month. Wow.
Online advertising. What a great business model.
This week's reaction to the LinkedIn IPO suggests the new dot-com mania may have some way to run. There's still a lot of skepticism about the Web out there, and that's bullish. Lots of people who "just don't get it." The new economy. The new world. Web 2.0. Web 3.0. It's not about earnings; it's about eyeballs!
Bubbles typically don't burst till the last bear turns bullish. The collapse of the last dot-com bubble was signaled weeks in advance, when the IPOs stopped popping on their debuts.
Cash in while you can. Resume-site.com? Resume-world.com? Resumeszone.com? GoDaddy says these domain names are all free, for just $12 a month. Or pick some goofy name out of a hat. But make sure to get out in time.
Be as shameless as you want. In the months leading up to the IPO, LinkedIn insiders awarded themselves millions of stock options at prices as low as $19.63 a share. They have now made $300 million just on the options they've awarded themselves this year!
And the great game continues. A public stock basically gives them their own currency with which to pay themselves. What a deal! The fine print of the LinkedIn prospectus shows management plans to issue millions more in stock and options to insiders — massively diluting current shareholders.
Meanwhile, if you are an investor in this IPO, please do the math.
LinkedIn is now valued at $10 billion. That's 660 times last year's net income of $15 million.
Apple (AAPL - News), by way of comparison, is at 16 times earnings.
Surely no one would invest in a high-risk stock like LinkedIn unless they expected strong capital gains (there are no dividends, naturally). But if you are hoping LinkedIn will rise by, say, 20% a year from here, be aware of what that would mean: In 10 years' time, it would be valued at $62 billion. (And that ignores potential dilution from new stock and options.)
If by then the stock were trading on a more reasonable multiple of, say, 20 times earnings, net income would have to be $3.1 billion.
How do you get from $15 million to $3.1 billion in 10 years? You grow earnings by 70% a year, every year, for a decade.
The chances of this happening? You make the call.
Labels: dot com bubble
posted by no_slappz at 1:47 PM
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