Since it's IPO in 2011 where it reached, on day one, near $130 (closed around $94 for fairness sake), LNKD has returned 46% (100%) to investors. This, in the midst of one of the greatest market turnarounds in history, the SP has returned 43%. So LNKD has about matched the market return in three years (depending on how precise your market timing is). Where is the growth? Who actually is making money?
Where is the money? The money all went to the founders, angels, VCs, and investment banks in the IPO. The instant burst of liquidity (to a barely profitable company) allowed all of them to cash out for massive multiples over what the actual business is worth. Today, none of the founding five members own a reportable stake. Why anyone pays ridiculous multiples for a business that doesn't make any money is beyond comprehension.
So who is left holding the bill? The current shareholders of course. Mostly through mutual funds, which may or may not be choosing to own the stock. Many surely own it as a reflection of their "strategy", which mimics some indexable formula (Growth Stocks, Mid-Cap, Technology etc.). In order for LNKD to return to a market matching valuation (~19xE), earnings would have to increase 45x over. Immediately. Not in 5 or 10 years or a DCF would need to be applied compounding the growth astronomically bigger. How can an established company with market penetration and a monetization strategy possibly increase sales by that factor?
The growth is already in the price. It was from day one when the founders took the company public. Sure, the stock has increased since then but the economics of the business can't possibly continue the madness. When will LNKD in revert back to the mean? I have no idea but a due date lingers for this rocket ship.
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