LinkedIn to Issue $1.15B Convertible Senior Notes
LinkedIn (LNKD) is set to issue $1.15 billion convertible senior notes scheduled to mature in 2019. The company is yet to decide on the interest rate or the conversion rate of the notes, but has confirmed that interest for the same will be paid to the note holders on a half-yearly basis. The company is also set to enter into privately negotiated convertible note hedge transactions to reduce the dilutive effect of the notes at the time of conversion.
LinkedIn expects to utilize the net proceeds for general corporate purposes after paying for the convertible note hedge transactions.
We believe LinkedIn’s convertible notes will find many takers following its consistent top-line performance over the last couple of quarters. The company has grown at a rate of 45–50% in the past few quarters. Also, the company’s member count remains impressive, indicating wider adoption of its services. These factors prompted the company to raise the fiscal 2014 revenue forecast as well.
Moreover, LinkedIn has a strong balance sheet without any debt. The company also generates a steady cash flow which remains its strong point in servicing any sort of debt issue it undertakes.
LinkedIn remains a leader in the emerging online professional networking segment with increasing worldwide popularity and steady growth in the recent past.
We believe that LinkedIn’s traction in the mobile segment will be one of its growth catalysts primarily due to its application launches for Apple’s (AAPL) iPhones and Android-based smartphones. Synergies from acquisitions are also expected to positively impact results over the long run.
Moreover, LinkedIn’s initiatives to increase advertising revenues through product launches and partnerships are praiseworthy. Advertisers are also taking a note of the company’s growing user base.
We also believe that the investments in strategic products are necessary for LinkedIn as other companies like Facebook (FB) and Twitter (TWTR) are looking to expand into the professional space. While continued investments to provide new and improved products and services are likely to impact LinkedIn’s profitability in the short run, we consider these investments necessary to drive member growth and user engagement over the long haul.
Currently, LinkedIn has a Zacks Rank #3 (Hold).
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