Social network Viadeo shelves IPO plan

PARIS Mon May 16, 2011 12:24pm EDT

Dan Serfaty, CEO of Viadeo, speaks during the Reuters Global Technology Summit in Paris May 18, 2010. REUTERS/Stringer

Dan Serfaty, CEO of Viadeo, speaks during the Reuters Global Technology Summit in Paris May 18, 2010.

Credit: Reuters/Stringer

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PARIS (Reuters) - Viadeo, the world's second-biggest social network for professionals behind LinkedIn, is deferring a plan to go public, preferring instead to focus on growth in emerging markets, its chief executive said.

The French group had been mulling an initial public offering (IPO) in Europe, the United States or Hong Kong in a bid to surf on a wave of investor interest in technology start-ups that has sent valuations sky-rocketing in recent months.

Chief Executive Dan Serfaty told the Reuters Global Technology Summit that Viadeo could revisit the question of going public in about 18-24 months.

"We saw a tremendous level of interest by bankers, private equity investors and venture capitalists," said Serfaty. "But we decided that our fundamentals were good enough that we could wait for a listing and instead focus on growing the business."

LinkedIn will launch its IPO on Thursday in what is widely seen as a test of investor hunger for shares in hot social media start-ups. It hopes to raise around $150 million to further its product expansion, hiring and acquisitions.

Last week, Renren Inc (RENN.N), one of China's biggest social networking companies, rose 29 percent in its debut on the New York Stock Exchange.

Viadeo's decision not to do an IPO could bolster the view held by some investors that the valuations of Internet companies are hitting a ceiling.

They worry that social media sites like Facebook and Twitter, group-buying site Groupon and social gaming company Zynga cannot grow fast enough to keep pace with their valuations, and that the frenzy is another bubble akin to the late 1990s.

Viadeo's Serfaty said the "euphoria" among investors was causing valuations to climb far more quickly than the fundamentals of the businesses often justified.

Serfaty added that bankers he had met with in the U.S. attributed much higher valuations than those of European investment houses.

"We are in an IPO frenzy in the U.S. and at some point it will hit its limit," he said.

After several months of examining its IPO options, Serfaty decided against a flotation because he worried that such a move would hamper the company's ability to invest heavily in emerging markets in Asia and Latin America in the coming years.

"We want to grow and not be faced with the pressure to deliver profitability right away," he said. "There is a risk of going public too early."

Viadeo, which says it has more than 35 million users, is seeking to position itself as the more international cousin of LinkedIn, with its users coming from Europe, China, India and Latin America.

Serfaty added that there was so much money available from private equity and venture capitalists that even if the company needed funds to fuel its expansion, it could collect them easily without going public.

LinkedIn, which says it has more than 100 million users, focused in the U.S., has set a price range for its IPO that values it at $3 billion or around 12 times 2010 sales.

In comparison, search engine giants Google (GOOG.O) and Yahoo (YHOO.O) are valued at 6 and 3.5 times 2010 sales respectively.

Both LinkedIn and Viadeo have business models focused on free initial access for users to post their resumes, followed by paid access for premium users. The sites also sell advertisements to generate revenue.

(Editing by James Regan)

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