Years ago I received a call from the lead manager of an IPO for a convenience store chain. They asked me if I wanted to buy shares at the IPO price. At the time I was heavily involved in the convenience store industry. I did an analysis of the company and told them I wanted to short the stock, implying that this world renown investment bank had mispriced the stock. On the first day of trading the stock traded down and stayed down for at least the first two weeks of trading.
I do not make a habit of trading in IPO stocks and I rarely go short, but for the recently announced LinkedIn IPO one might want to consider it. Now the pricing has not been set so it is premature to advocate for shorting the stock, but I have followed this company closely for years. The most popular post on SF in 2010 was this story "LinkedIn: Is It a Strategic Error". The post made the first page of Hacker News, which suggests to me that the geek world found merit in the story.
Business Insider reported yesterday on the LinkedIn 2010 revenue growth, which in absolute and relative terms looks strong. What concerned me is that for the year-to-date 45 percent of revenue comes from recruiting, up from 30 percent in 2009. While it appears that LinkedIn has focused on a growing segment in their business, how attractive is another job site. With all of its potential, is LinkedIn settling to be just another player in the crowded job market?
This weekend I plan to read the S-1 in detail. The LinkedIn S-1 is here.
Remember to consult your investment advisor before making any investment decisions, that shorting stocks is a high risk trading strategy and that I rarely go short so my analysis is suspect.
