LinkedIn shares down 2.9 per cent on $1 billion stock offer

Shares of LinkedIn were down 2.9 per cent on Wednesday as investors reacted to the online career networking site's decision to offer $1 billion in new stock in a secondary offering, USA Today reports.

The announcement, which came after the close of trading on Tuesday, stressed that the purpose of the new stock issue was to raise additional money to increase the company's "financial flexibility" and to "further strengthen its balance sheet," the report said.

According to Arvind Bhatia, an analyst at Sterne Agee, LinkedIn's move was "opportunistic," and likely driven by "favorable market conditions" and its "strong stock performance" this year.

Shares of LinkedIn, which closed at $246.13 on Tuesday, were up 108.1 per cent in 2013 and hovering just below the stock's 52-week high.

The company's May 2011, initial public offer price of the stock was $45. The price more than doubled on its first day of trading, raising LinkdIn's market cap nearly $353 million, according to the New York Stock Exchange. With the latest offering, the company would raise nearly three times the amount of cash.

Though the company had not priced the secondary stock offering yet, it expects to raise around $1 billion based on the 30 August closing price of $240.04.

LinkedIn said it intended to use the cash proceeds of the stock sale for general purposes, such as expansion of product offerings, expansion of operations internationally as also for "potential strategic acquisition."

Bhatia noted that since no specific acquisition was tied to the stock offer, it appeared the timing of the capital raise was "opportunistic," given favorable market conditions.

Roben Farzad writing in BloombergBusinessweek, said the move was evidence of some shrewd financial management at the professional network.

The company had seen its stock surge fivefold since its debut a little over two years ago. According to the company, the objective of the sale was to ''increase LinkedIn's financial flexibility and to further strengthen its balance sheet'' and ''to use the net proceeds for general corporate purposes, including working capital, expansion of product development and field sales organisations, international expansion, general administrative matters and for capital expenditures, including infrastructure. It may also use a portion of the net proceeds from the offering for potential strategic acquisitions of, or investments in, complementary businesses, technologies or other assets.''

In simple terms, this translated into more cash and anything the company liked to do with it.