A Short Note On 9 Billion Market Valuation For Linkedin Essays

A Short Note On 9 Billion Market Valuation For Linkedin Essays

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There are a few assumptions that underlie the $9 billion market valuation for LinkedIn as of the end of July 7, 2011. One method would be the use of comparables; another method is the peers who are also publicly trading and the third method is performed by using other companies other than its peers who are publicly trading or can compare the valuation to companies which are outperforming the stock’s secondary market in order to find the true worth of the company through social networking sites (Investopedia). In 2010 LinkedIn reached 100 million members and a market valuation of $8.9 billion in comparison to its competitors. One of its competitors VIADEO had 35 million members and another competitor XING with 10.8 million members (Del Moral 2014).
I believe that LinkedIn may not be able to generate the revenue from other geographies as its peers are doing. LinkedIn offers its majority services to the U.S. markets and has left room for competitors to jump in and take presence in other countries LinkedIn’s major competitors, VIADEO and XING primarily focus their businesses in the European countries and they have incorporated many languages to their system while LinkedIn lacks the ability to capture these languages in their services. Another issue that is arising with LinkedIn, their fees are lower than its competitors.
LinkedIn’s estimated beta is at 1.5 at the end of July 7, 2011. Beta measures the volatility, or systematic risk of a security or a portfolio in comparison to the market as a whole. It is used in the capital asset pricing model, which calculates the expected return of an asset based on its beta and expected market returns (Investopedia).
LinkedIn has had much success with the price of their shares over th...


... middle of paper ...


...ir debts by creating a better asset liability ratio (Seeking Alpha 2011).
Another method that may be contributing to LinkedIn’s market valuation is the dual-class shares. This allows shareholders of non-traded stock to control terms of the company in excess of the financial stake. This was designed to give specific shareholders voting control, unequal voting shares in order to satisfy owners who don’t want to give up control but wants to receive the funds from their investors (Investopedia). LinkedIn’s shareholders who purchase this stock will receive, Class A shares. They will have one vote apiece and its current shareholders and co-founder, Reid Hoffman, is entitled to ten votes apiece (Solomon 2011). The dual-class shares places voting control in order to preserve and protect the corporate culture of the company and gain the benefits of its investors’ funds.

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