LinkedIn held its initial public offering (IPO) on May 19, 2011, making its stock available for public trading for the first time. The LinkedIn IPO price was set at $45 per share. When LinkedIn stock began trading on the New York Stock Exchange on its opening day, it opened at $83 per share, nearly double the IPO price. By the end of the first day of trading, LinkedIn shares closed at $94.25, 109% above the IPO price.
LinkedIn IPO Details
Here are some key details about the LinkedIn IPO in 2011:
- IPO date: May 19, 2011
- IPO price: $45 per share
- Opening share price: $83
- Closing share price on first day: $94.25
- Ticker symbol: LNKD
- Exchange: New York Stock Exchange
- Number of shares offered: 7.84 million
- Total shares outstanding after IPO: 109.46 million
- Amount raised: $352.8 million
The strong opening day performance of LinkedIn stock was seen as a sign of strength in the tech IPO market after the recession. It was the first U.S. social media company to go public. Prior to the IPO, LinkedIn was valued at around $3 billion by private investors.
LinkedIn IPO Pop
The surge in LinkedIn’s share price from its IPO price of $45 to its first day closing price of $94.25 represented a “pop” of 109% on its first day of trading. This nearly doubling of the stock on day one was an unusually large IPO pop.
In an IPO, the investment banks underwriting the offering will typically try to price the stock fairly, leaving some room for a modest first day gain of around 10-20%. Pricing an IPO too low leaves money on the table for the company, while pricing it too high risks a lack of demand.
The more than 100% day one increase in LinkedIn’s stock price suggests the underwriters priced the IPO conservatively, undervaluing investor demand. The strong pop caused LinkedIn to raise less money than it could have if the offering had been priced higher.
LinkedIn IPO Underwriters
The LinkedIn IPO was led and underwritten by three investment banks:
- Morgan Stanley
- Bank of America Merrill Lynch
- JPMorgan
As lead underwriters, these banks helped determine the IPO pricing and coordinated the listing process. They also distributed the majority of shares being offered to institutional investors.
Having three well-known investment banks as lead underwriters helped bolster investors’ confidence in the young social media company. The strong brand names lent credibility to LinkedIn’s IPO.
Use of IPO Proceeds by LinkedIn
As a relatively young tech company at the time of its IPO, LinkedIn planned to use the $353 million in proceeds raised for general corporate purposes. As outlined in its IPO prospectus, LinkedIn said it intended to use the proceeds for:
- Working capital
- Capital expenditures
- Acquisitions
- Other general corporate purposes
Having the influx of capital from the IPO provided LinkedIn with greater financial flexibility to invest in growing its business. The company was able to fund technology infrastructure, expand its talent pool through hiring, pursue acquisitions, and strengthen its balance sheet.
LinkedIn IPO Impact
The successful LinkedIn IPO marked a major milestone for the company and the social media industry more broadly. Here are some of the key impacts:
- Validated investor appetite for social media tech companies, paving the way for other IPOs like Facebook, Twitter, and Groupon.
- Provided LinkedIn with capital to accelerate product development, expand globally, and pursue growth strategies.
- Created publicity and raised brand awareness of LinkedIn with consumers.
- Allowed LinkedIn’s early investors and employees to realize financial returns by selling shares.
- Established LinkedIn as a publicly traded company, providing transparency into its finances.
Overall, the LinkedIn IPO was a major inflection point for the company. It marked the beginning of the next growth phase for the professional social network.
LinkedIn Today Post-IPO
In the decade since its IPO, LinkedIn has grown into a much larger and more diversified business under public market ownership. Key milestones include:
- Membership increased from 100+ million at IPO to over 740 million currently
- Expanded globally, with over 75% of members now coming from outside the U.S.
- Revenue increased from $243 million in 2010 to nearly $8 billion in 2019
- Expanded through strategic acquisitions like Lynda, Glint, and Drawbridge
- Added job posting, eLearning, marketing solutions, and other monetization models
- Acquired by Microsoft in 2016 for $26.2 billion
While no longer an independent publicly traded company, LinkedIn continues to thrive as a business unit within Microsoft. The IPO enabled LinkedIn to scale rapidly in the years after going public, eventually becoming an acquisition target for Microsoft.
Conclusion
The LinkedIn IPO at $45 per share in May 2011 marked the first public debut of a major U.S. social media platform. The 109% “pop” on the first day of trading signaled strong investor demand for social media companies leading up to other high profile IPOs like Facebook and Twitter. With the influx of capital from the markets, LinkedIn was able to accelerate its member and revenue growth, pursue new initiatives, and establish itself as the world’s largest professional social network before being acquired by Microsoft in 2016.