LinkedIn Valuation: US$1bn
After astronomical valuations of Facebook, here comes LinkedIn. The professional networking site has received US$53m investment in fourth round of funding. The transaction involving investment from Bain Capital, Sequoia Capital, Bessemer Venture Partners and Greylock Partners values the company at US$1bn.
Microsoft invested US$240m late last year in Facebook for a 1.6% stake valuating the social network at US$15bn. The high price tag attached with these deals puts all traditional valuation matrices like net profit, book value, PE ratio etc at back burner. While many analysts claimed that the deal reflected Microsoft's urge to grow its advertising business more than Facebook’s true worth, LinkedIn deal appears more balanced though still on the higher side. LinkedIn has 23 million members whereas Facebook had 50 million members at the time of the deal.
Some simple back of the envelope calculations show that deal valued Facebook at a PE multiple of more than 300 and sales multiple of 100!!! On the other hand traditional manufacturing including automotive component companies are being sold at annual sales multiple of 1 or even less. Are we missing something??? The situation resembles tech bubble euphoria. Last year, eBay admitted that it overpaid for the internet telephone service provider Skype when it bought it for US$2.6bn in 2005. Back home Satyam paid hefty INR4.99bn for some Indiaworld (I doubt if anyone remembers it now except Rajesh Jain) at the height of dot com bubble.
Unlike Facebook, LinkedIn is making profits and generates revenue from advertising and premium subscriptions. The company also may make acquisitions with its new cash. Let’s hope it’s not the other bubble in the offing.
Microsoft invested US$240m late last year in Facebook for a 1.6% stake valuating the social network at US$15bn. The high price tag attached with these deals puts all traditional valuation matrices like net profit, book value, PE ratio etc at back burner. While many analysts claimed that the deal reflected Microsoft's urge to grow its advertising business more than Facebook’s true worth, LinkedIn deal appears more balanced though still on the higher side. LinkedIn has 23 million members whereas Facebook had 50 million members at the time of the deal.
Some simple back of the envelope calculations show that deal valued Facebook at a PE multiple of more than 300 and sales multiple of 100!!! On the other hand traditional manufacturing including automotive component companies are being sold at annual sales multiple of 1 or even less. Are we missing something??? The situation resembles tech bubble euphoria. Last year, eBay admitted that it overpaid for the internet telephone service provider Skype when it bought it for US$2.6bn in 2005. Back home Satyam paid hefty INR4.99bn for some Indiaworld (I doubt if anyone remembers it now except Rajesh Jain) at the height of dot com bubble.
Unlike Facebook, LinkedIn is making profits and generates revenue from advertising and premium subscriptions. The company also may make acquisitions with its new cash. Let’s hope it’s not the other bubble in the offing.
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