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Breakingviews: LinkedIn cash out

Wednesday, September 04, 2013 - 03:25

Sept. 4 - The professional social network is selling $1 bln of stock. Breakingviews columnists discuss the firm’s need for cash when its balance sheet is flush.

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Usually when companies feel really really confident about their businesses that buy back stock. It's often the wrong thing to do Linkedin on the other hand is selling about a billion dollars of its stock. Seems it is sort of interesting thing going on here. They're selling on the stock they haven't actually got an actual purpose sports I think got a rights issue that they need to do for now this town of Arab and decided that whatever general corporate. They're doing it because the stock is trading at some ridiculously high price it's like an 800 times next year and this year in earnings and it's kind of like a pretty interesting mirror image of what happens -- most companies. You have logos -- what they -- it's like if you look at historically 2007 -- -- stock buybacks and guess what the market you know -- to -- the year later. And then mark by that simply dried up when when share prices were down the bottom right wing which -- it would -- -- the time to use that very capital on the balance you know buy -- you can watch box for about a third of the you know it -- -- -- -- -- -- record price. Well Lincoln is saying is they're saying well actually you know -- stuff maybe you know 800 times as cute -- -- gave -- a good time to get it to add some cash for balance sheet. -- thing this thing is they don't need to catch they've got about 900 million of cash from the books. They're really profitable business the probably the business is growing steadily they could -- they got -- -- cast a generating -- yet they can easily finance and have cash left over from months present when they that there aren't yet they actually the cash stock -- grown it in and out of more than twice as big as it was that the IPO. So if that this seems like. Doing the right thing right that you sell stock when the prices quite high right you should buy it when it looks like not a in his investor obviously -- -- -- the media obviously the question the question -- is -- people buy this stock with a selling and what -- the Sampras because. You know if if you take this is a signal of that that this is a sort of that toppled pleased with top then. Stock the stock price may -- may be set to come down with those kind of multiples it's kind of hard to imagine that. That is sustainable for the -- than earnings can -- to say you can grow into it to know I'm. What with it I mean this zone we're gonna have to enter that world of conjecture here but I mean it's they have and the billion dollars that balancing presumably it's too. By other than to buy startups and never feel that it's it's for growing internationally a candidate got a lot of the event is some of the big countries particularly to expand team in developing countries and they can't they could -- and other companies there perhaps going to look. I have a social -- it got a two point seven million dollar market cap so and they have this this currency that stock which is also of course highly valued. Seller would NASA want the stock is one possibility but there are developing new products that you need you and you can't you need to finish you -- But it sounds like get it sounds plausible getting at is how long is your investment horizon you know these. -- they built the company founders had -- in ninety and is there a built in that last for very long time if they're still taking a long term viewpoint and they say. You know look at stocks really high right now maybe a couple of years who knows that the market's gonna do and if there's another tech crash for instance right perhaps this would be nice to have this extra cash in the balance -- last. Editors well something sensible thing to do I can't imagine those shareholder. Mrs. Clinton and they wouldn't seem sensible to me as a shareholder looked at but just to by the stuff. But that it I kind of semi management's doing. -- will be back with more breaking -- tomorrow.

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Breakingviews: LinkedIn cash out

Wednesday, September 04, 2013 - 03:25

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