LinkedIns Stock Sale Could Signal Resource Crunch

The secondary offering of around 1.3 million new shares can send out a signal that LinkedIn intends to pursue heavy marketing investments in the near future as well, requiring additional cash sources for the same.


In addition to its growth outlook, the public float will essentially double with this secondary offering, which could weigh on the share price from the perceived overhang of future sales while providing more shares available for shorting. To short, traders need to borrow the shares and the small float so far has been this difficult for any large funds to undertake.


Since it went public, LinkedIn has incurred significant marketing and promotion related expenses, which have contributed a big role in the steep expansion in its subscriber base. For the first 9 months of 2010 and 2011, marketing expenses grew from 24% to around 32% as a percentage of revenue.