LinkedIn Corporation

Case Solution

Francois Brochet, James Weber
Harvard Business School ()

The purpose of this case is to help students critically assess the market value of LinkedIn shares after their recent initial public offering. Given the strong investor interest in social media companies, LinkedIn is the lampholder among US companies in the industry considering entering public markets. The case may serve to illustrate the challenges of initial valuation of a high-growth company that has great uncertainty about its fundamental value and how quoted prices can reflect expectations that are difficult to justify. Regardless of the valuation method that is used (e.g. residual income, discounted cash flow, multiples), the case provides a platform, (i) to map the company’s key success and risk factors in forecasts and estimates of its future performance and cost of capital, and (ii) critically assess the underlying assumptions underlying market expectations. The case is best suited for a business valuation course at all levels (undergraduate, MBA, executive programs).

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