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We have seen this happen with the China-based Internet company RenRen which is now trading below its first IPO price after launching earlier in May Also, as this Forbes blog post states, there's a fear that this kind of IPO could be the sign of a new Internet Bubble like we had in the late 1990s when Internet companies seemed to be going public daily. One of the big questions is if LinkedIn's stock will stay at that high price or will it go back down. Keep in mind that the company had revenues in 2010 of just $243 million and a profit of only $15.4 million for that year. That's much higher than the $4 billion cap that the company set for itself before today's IPO launched. Even at that price that means the market cap for LinkedIn is currently set at a whopping $9 billion. The price went down to $94 a share before the market closed today. Venture Beat reports that on the first day of trading on the New York Stock Exchange, the share price of LinkedIn went up from its starting price of $45 all the way up to a high of $122 a share. Ultimately, they decided that LinkedIn was in a better competitive position if it, ahem, linked in with Microsoft.Today was the first day for people to purchase and trade stock in the business oriented social networking web site LinkedIn and it was a very good day for people who decided to put their money it. Hoffman, had noticed late last year: The biggest companies in the Valley - Facebook, Google and a few others - had pulled way ahead of the pack by increasing and earning the largest valuations, making it harder for smaller tech companies to attract top talent. Weiner said that the impetus for the deal was not about the stock, but was more about a larger trend that he and LinkedIn’s founder, Mr. In that memo and in conversations with employees on Monday, Mr. Weiner made in a memo he sent to employees. (Though as a unit of Microsoft, it is unclear whether their results will even be broken out for investors to see).Ī spokeswoman for LinkedIn declined to comment, pointing to comments Mr. In other words, from now on, LinkedIn employees will no longer enjoy results that looked rosier because their stock-based compensation was not figured in. Other stock analysts took note that Microsoft, which includes stock-based compensation in its non-GAAP earnings calculation, made a point on Monday of saying that the combined company would follow Microsoft’s practice. LinkedIn, Twitter, Yahoo and Alibaba, which “have the most dependence on stock-based compensation,” also have results “of relatively lower quality,” Mr. “Stock-based compensation plays an important role in how we compensate our employees, and therefore we view it as a real expense for the business,” David Wehner, Facebook’s chief financial officer, said in an earnings call. In April, Facebook, which also used to steer investors to use adjusted-Ebitda earnings numbers that also excluded the cost of stock-based compensation, announced that it was changing its policy. Buffett also criticized analysts who “play their part in this charade, too, parroting the phony, compensation-ignoring ‘earnings’ figures fed them by managements.” The very name says it all: ‘compensation.’ If compensation isn’t an expense, what is it? And, if real and recurring expenses don’t belong in the calculation of earnings, where in the world do they belong?” Stock-based compensation, he said, “is the most egregious example. Buffett wrote in his annual report published this year. “It has become common for managers to tell their owners to ignore certain expense items that are all too real,” Mr.

Buffett have been highly critical of the practice. Companies like Google, Amazon and Facebook paid out about 15 percent of operating income, or well under 10 percent of revenue.īut investors like Warren E. LinkedIn paid out $510 million in stock-based compensation last year over the last two years, that stock-based compensation represented a whopping 96 percent of operating income, or 16 percent of revenue, according to Mr. The company purposely strips out the cost of stock-based compensation, which has the effect of turning losses into gains. That’s because LinkedIn steers investors to focus on what’s known as its adjusted Ebitda, or non-GAAP earnings.

You wouldn’t know that if you only glanced at LinkedIn’s news releases. But despite all the headlines about growth and profits, LinkedIn has been a money-losing operation for the last two years. Weiner - who took over as LinkedIn’s chief in 2009, succeeding Reid Hoffman, the founder - has done a tremendous job in the past years building the company’s business, which is primarily about helping people connect to one another for employment and conduct business-oriented social networking.