With an amazing increase in share value over the past year, LinkedIn is finally using its success on the stock market to bring in real, usable money. According to a Securities and Exchange filing, LinkedIn plans to sell 4.17 million shares of its Class A stock to raise $1 billion, based on the company's $240.40 share value.
There are few companies that experience the type of share value increase that LinkedIn has seen since its initial public offering in 2011. Since its IPO, LinkedIn's share value has increased from $45 to $240, a fivefold increase in just two years.
More than $1 Billion?
Although receiving the $1 billion with this stock sale is only a possibility as is, LinkedIn actually has the potential to receive $1.15 billion. Since LinkedIn will be offering 15 percent of the aforementioned shares to all of the participating banks, they would be able to push up LinkedIn's total cash to nearly $1 billion.
At the end of the second quarter LinkedIn had $873 billion in cash, so by no means does the company need another $1 billion. However, there is no LinkedIn executive that could look at the social network's rising share value and pass up a sale.
LinkedIn's stock sale is actually a departure from the way most companies carry out and purchases of their own stock. In most situations, a company such as LinkedIn would buy when its stock is high and then sell it when the share value is low. However, LinkedIn is switching things up and selling at what appears to be a nearly unbeatable high from the company.
Using the Money
Most of us cannot fathom using $1 billion, but a company with millions upon millions of users is able to put that type of money to good use. According to LinkedIn, it plans on using the potential $1 billion from the stock sale to pay for internal expansion, product development and maybe -- and it truly is a maybe -- the acquisition of a few competing or useful companies.
Over the course of its existence, LinkedIn has only acquired eight companies. Most of those have been for less than $20 million, with the only one standing out from the rest being SlideShare, which LinkedIn paid $119 million for.
Compared with other social networks, namely Facebook and Twitter, LinkedIn has kept almost completely to its own. Facebook has completed 37 acquisitions, most of which have been in the last two years, and Twitter has also been busy, acquiring dozens of smaller technology companies.
LinkedIn could benefit from beefing up its portfolio, but it has done well so far with just a few purchases. There are more than 200 million users on the network, with adoption rates breaking past 30 percent in multiple countries. As more jobs move online, the benefits associated with using a service like LinkedIn are countless.