This Case is aboutÂ FINANCIAL ANALYSIS
PUBLICATION DATE: October 18, 2011 PRODUCT #: 112006-PDF-ENG
The objective of the case will be to help students critically assess the market value of the stock following its recent IPO of LinkedIn. In the context of strong investor appetite for social media businesses, LinkedIn is the lamp bearer among U.S. firms in that sector that are considering tapping into public marketplaces. The instance can function to exemplify the challenges of valuing an early-phase high-growth business with a lot of doubt about fundamental value and costs that are quoted might represent expectations which are difficult to justify. No matter which valuation approach is used (e.g., residual income, discounted cash flow, multiples), the instance provides a stage (i) to map the company’s crucial success and risk factors into predictions and estimates for its future operation and cost of capital, and (ii) to critically evaluate the tacit premises underlying the market’s expectations. The case is suitable for a class on business valuation at all levels (undergraduate, MBA, executive programs).