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LinkedIn at lofty valuation in IPO, a test for social media

These are stories Report on Business is following Wednesday, May 18. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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LinkedIn prices at top of range In a test among investors for the Facebooks, Twitters and Groupons of the world, LinkedIn Corp. today priced shares in its initial public offering at $45 (U.S.) each, the top end of its range in a sign of heavy demand. That values the social networking site at more than $4-billion.

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LinkedIn said it sold 7.84 million shares after boosting the range by 30 per cent only yesterday, to what some observers believe is a lofty price.

More than 4.8 million of those shares were from the company, about 3 million more from existing stockholders, the company said. An over-allotment could run to about 1.8 million shares, said the company, whose profit in 2010 was $15.4-million on revenue of $243-million.

"I wouldn't touch the stock, I wouldn't own it, not at $45, not at $43," Eric Jackson, managing member at hedge fund Ironfire Capital, told Reuters, suggesting he could buy it at, say, $25.

Still, those running the IPO should have their fingers on the pulse of the market.

"The underwriters have to be absolutely sure they have the price right," Scott Sweet, managing director of IPO Boutique, a research firm, told The Wall Street Journal earlier.

"There is no way they would risk blowing up this deal when they very well could be chosen for Twitter, Groupon, Zynga or Facebook's down the road."

Facebook, for example, now carries a valuation of some $70-billion, based on private stock sales, Reuters news.

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"There is a feeding frenzy is going on," Ben Howe, the chief executive officer of America's Growth Capital, a boutique investment bank, told Reuters earlier.

"There are companies that are going to have very strong positions in massive markets such as Facebook ... but I think most of the other companies that are riding on their coattails and getting these enormous valuations do not fit the same profile and are just extremely overvalued."

RIM PlayBook sales on track Despite some troubles with the introduction of its PlayBook, Research In Motion Ltd. has sold an estimated 250,000 of the tablet computers since the mid-April launch, checks by RBC Dominion Securities indicate.

Analyst Mike Abramsky believes RIM could sell 500,000 in the first quarter, more than early sales suggest for the Android-powered Motorola Xoom.

Checks at 180 Best Buy outlets, he said, indicate that 84 per cent of the 64-gigabyte units have sold out, 71 per cent of the 32 GB, and 14 per cent of the 16 GB.

"Despite its launch drawbacks and RIM's recall of 1,000 PlayBooks, checks show PlayBook returns are nominal to date," Mr. Abramsky added.

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As for the BlackBerry side of the business, Mr. Abramsky said checks in the United States, Canada, Britain, France and Germany suggest the U.S. market remains "soft," and that smart phone shipments in the first quarter could sink 9 per cent, which is in line with RIM's forecasts.

As for quarterly results, they appear to be in line with the company's reduced projections of $5.2-billion (U.S.) in revenue, and earnings per share of $1.30 to $1.37.

Mr. Abramsky did not change his price target on the stock, at $55, and he rates it "sector perform."

At Sanford C. Bernstein, analyst Pierre Ferragu boosted his rating to "market perform, though, according to Bloomberg News, he added that "we believe management remains in denial of the challenges facing the company."

What awaits industry minister Canada's new industry minister has a lot on his plate, everything from telecom ownership to gas prices.

As The Globe and Mail's Steven Chase, Jane Taber and Bill Curry report from Ottawa, Prime Minister Stephen Harper today named Christian Paradis to the post as his predecessor Tony Clement moved to Treasury Board.

Still hanging out there from Mr. Clement's reign are a look at relaxing ownership restrictions in the telecom sector, which would allow the smaller players more access to capital, London Stock Exchange Group PLC's merger bid with TMX Group Inc. , and takeover rules in general after Ottawa's rejection of BHP Billiton's bid for Potash Corp. of Saskatchewan.

That LSE issue may become academic if a group of Canadian banks and pension funds succeeds with its rival bid for the operator of the Toronto Stock Exchange. But that, in turn, would create other issues surrounding competition.

As well, just before he shifted jobs, Mr. Clement had called for Parliamentary hearings into high gas prices, another issue left over for Mr. Paradis.

Just after the Conservatives won their majority, analysts had speculated on how quickly Ottawa could would move to relax telecom ownership restrictions. The appointment of Mr. Paradis could delay certain initiatives, UBS Securities Canada analyst Phillip Huang said today.

"While we continue to believe the government will move to relax telecom foreign ownership restrictions, as we have noted previously, the cabinet shuffle may delay the process and, tied to that, the release of 700MHz spectrum auction rules," Mr. Huang said in a research note.

"This is because Mr. Paradis may need time to acquire up-to-date knowledge of the sector, and may also prioritize and approach his new files differently, particularly since Mr. Paradis is also taking on the role of Minister of State (Agriculture)."

What might that mean for the industry?

"Since we believe the removal of telecom foreign ownership restrictions would create greater competition for the sector, we believe a delay in the process could help the sector by postponing the new entrants' access to foreign capital, the potential entry of new foreign competition, and spending on new spectrum," Mr. Huang said.

"It could also delay the potential sale of Allstream. As a result, we believe this event will help near term sentiment for the incumbent wireless players (particularly Rogers), and dampen speculation on the sale of Allstream at MBT."

Bombardier sees market rebound Bombardier Inc. says it's beginning to see a recovery in the commercial aircraft market.

"China, India and other developing regions are leading the global industry recovery and are expected to capture an increasingly important share of industry orders in both the business and commercial aircraft markets," the Montreal-based aircraft and train manufacturer said today in its annual 20-year forecast.

Bombardier projected "a return to sustained growth in business aviation," with industry-wide business jet manufacturing of 24,000 between 2011 and 2030. That would be worth more than $600-billion. The first 10,000 of those will come in the next decade, it said.

For commercial aircraft, Bombardier forecasts more than 13,000 in the 20- to 149-seat segment, worth almost $640-billion, up from its last projection.

It also cited a continued shift toward larger commercial aircraft.

Still, the company fears some headwinds, including high fuel prices.

"An area of concern in the industry continues to be the rising cost and volatility of oil prices, which creates uncertainty in the planning activities of many airlines," it said.

"Combined with the political changes taking place in many of the oil producing countries, and recent climatic events such as the earthquake and tsunami in Japan, the global demand for air travel has slowed in the short term. However, in the long term, the price of oil will drive airlines to accelerate the retirement of older, less efficient aircraft, increasing the demand for new-technology, more fuel-efficient aircraft."

Greece must do more, IMF warns Even though the Europeans have coined a new term - soft restructuring - pressure is still mounting on Greece to do more.

The embattled country has to meet its targets under a joint €110-billion bailout from the European Union and International Monetary Fund, and so far has been unable to do so. Last year, its deficit was more than two percentage above its target, at 10.5 per cent, and it has a long was to go this year.

Today, according to Reuters, the IMF's chief of mission to Greece, Poul Thomsen, told a conference in Athens that Greece won't meet its deficit-fighting targets unless it gets even more aggressive. This comes amid continuing protests and violent strikes in the country.

"The program will not remain on track without a determined reinvigoration of structural reforms in the coming months," Mr. Thomsen said. "Unless we see this invigoration, I think the program will run off track."

Earlier this week, the EU's Jean-Claude Juncker, the prime minister of Luxembourg, got the markets thinking with his suggestion that his group will look at the idea of a "soft restructuring" or "reprofiling" that would push out maturity dates for Greece. Despite what the market increasingly believes, Mr. Juncker rejected the idea of a major restructuring of Greek debt.

In International Business today

Pork treated with steroids, industrial chemicals in milk and now exploding watermelons - to read the headlines these days, it's a wonder anything on Chinese supermarket shelves is safe to eat. But that these headlines are more frequent than before is a sign that China's government has begun to use the media in its ongoing struggle to keep the country's food supply safe. Carolynne Wheeler reports from Beijing.

Celso Amorim, the former Brazilian foreign minister, was in New York this week to talk about his country's dramatic rise. One of the country's secrets: A commitment to polygamy. Trade polygamy, that is. Kevin Carmichael examines the issue from Washington.

In Personal Finance today

There's a difference between what you can and what you should borrow to buy a home, Rachel Mendleson explains in this excerpt from The MoneySense Guide to Buying and Selling Your Home.

If you rely on your laptop for work, go for higher quality and a better warranty, writes Home Cents blogger Shelley White.

In this week's Cash Clash, a Toronto woman is eyeing her underperforming RRSP as her credit-card debt rises, but her husband is urging her to think twice about cashing in her retirement savings.

From today's Report on Business

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