LinkedIn tipped to float in first quarter, Facebook could IPO in 2012

LinkedIn is reported to have appointed investment banks and advisers to assist with an initial public offering that could occur as early as the first quarter of 2011.

The news comes as speculation mounts about a possible float for fellow social networking giant Facebook, with reports this morning suggesting the company has told prospective investors it will float in 2012 or at least publish its financial results publically.

According to Bloomberg, LinkedIn has appointed Morgan Stanley, JPMorgan Chase & Co. and Bank of America to help it prepare for an IPO.

The company, which employs 1,000 people and now has 90 million users around the world, is seen as the leader in social networking for business people.

The company has raised about $120 million in the last few years, with the latest capital injection – a $20 million investment by Tiger Global Management in July 2010 – valuing the company at about $2 billion.

LinkedIn has so far refused to comment on the speculation, saying only that “an IPO is one of many tactics that we could choose to pursue.”

“We are focused on building our business and doing what is in the best long-term interest of LinkedIn members and shareholders.”

The size of the prospective listing remains unknown at this stage.

Rumours surrounding a potential IPO for Facebook have been gaining steam since early this week, when Goldman Sachs announced it would invest $450 million into the company, and then announced a process by which it would allow its clients to buy slices of its shares.

But there are two big conditions on Goldman Sachs offer – clients must be prepared to invest at least $2 million and cannot sell their stakes before 2013 or when Facebook finally floats.

Reports this morning suggest the float may well come first.

According to the New York Times and the Wall Street Journal, the information memorandum sent to prospective investors from Goldman Sachs client base says the company will either float in 2012 or will at least publish its financial details to the public.

That should go some way to allying fears of the US corporate regulator, the Securities & Exchange Commission, which has reportedly started investigating whether the fresh investment in Facebook could take it over the threshold of 500 investors that means a company must be regulated by the SEC.

Commentators have pointed out both Google and Apple were regulated prior to their float, so it’s unlikely the investigation will have been a surprise to Mark Zuckerberg and his team.

Of course, the new investment in Facebook, which values the company at a staggering $50 billion, will put more pressure on Zuckerberg to justify Facebook’s hefty price tag.

According to reports, the Goldman Sachs investor memorandum states Facebook made a profit of $355 million in first 10 months of 2010.

If we extrapolate that out for the full year, that’s a profit of $426 million for calendar 2010. Based on that, Facebook is trading on a price-to-earnings multiple of a staggering 117 times.