LinkedIn’s shares are struggling after the world’s leading professional network announced earnings forecasts in February that failed to meet investors’ expectations – and as the California company reels from losing almost half the value of its stock, CEO Jeff Weiner is giving his entire yearly $14 million stock bonus to his staff. So what exactly is going on with this once-stellar social media performer?
First a look at the facts.
LinkedIn – which like many internet stars had immensely humble beginnings, starting life in 2002 in the home of co-founder Reid Hoffman – currently has around 400 million members and over 9,200 employees at offices in 30 cities around the world. The platform is available in 24 languages and the company earns its revenues from a combination of premium subscriptions and marketing and talent solutions, which essentially means large-scale recruitment for companies.
LinkedIn made its stock market debut in 2011, with an IPO that valued the soaring company at around $3 billion. It seemed to be powering ahead until it hit a huge speed bump with its earnings forecast in February that saw a frenzied sell-off that pushed the stock down 45% in just a day. A year ago, LinkedIn’s shares were trading at $276.18 each; now, they’re worth around $117.
The problem, of course, is that revenues – which also include advertising income – are falling. First-quarter revenue for 2016 is forecast to come in at $820 million, but investors had been eyeing $47 million more, for a total of around $867 million. LinkedIn also said its total revenue for 2016 would be in the region of $3.6 billion – but again, that was less than what investors want, which is closer to $4 billion ($3.91 billion, to be precise). All that sent those investors scrambling, forcing a freefall in the share price that has yet to recover.
The network’s woes are being driven by slowing growth in membership and an increasingly pervasive fear among investors that many internet companies are way overvalued – that there’s another swelling tech bubble that’s about to burst. So in an apparent attempt to steady the careening ship, LinkedIn boss Weiner (who previously worked for Yahoo, which has troubles of its own) decided to keep his many workers happy at least by doling out his hefty annual stock bonus.
LinkedIn said he asked the company’s Compensation Committee to put his stock package “back in the pool for employees“.
The 46-year-old won’t be losing sleep over his lost millions, however – as he has many more in the bank, and holds a lot more stock in the company. In the meantime, LinkedIn is facing a harsh new reality in the brutal online world that’s also hitting other networks, including Twitter, as it attempts to regain its diminishing glory – and its plummeting share price.