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LinkedIn Corporation Case Solution

Solution Id Length Case Author Case Publisher
1927 678 Words (3 Pages) Francois Brochet, James Weber Harvard Business School : 112006
This solution includes: A Word File A Word File

On the financial side, dual categories of shareholding or low levels of floating shares can also have a severe impact on the share price of LinkedIn Corporation. For example, during its first Initial Public Offering, LinkedIn only made Class A shares public. Holders of Class A shares have only one voting right per share, whereas holders of Class B shares have ten voting rights per share. However, Class B shares are not available for public trading. Classifying the shares into two different categories of shares helped LinkedIn to prevent itself from any hostile takeover because only 8.3% of the shares are available to public. Remaining shareholders’ voting rights are still intact with the management and employees of LinkedIn. Furthermore, investing in Class A shares offered by LinkedIn can be very risk and as it includes a high degree of uncertainty.

Following questions are answered in this case study solution

  1. What other factors (e.g., low float, dual class of shares) may be contributing to LinkedIn’s market valuation?

Case Analysis for LinkedIn Corporation Case Solution

1. What other factors (e.g., low float, dual class of shares) may be contributing to LinkedIn’s market valuation?

With information flowing in every moment, it has become really difficult for the real investors to forecast the price movement of any stock. Therefore, it has become essential for any rational investor to understand major factors that can affect the value of a stock traded in the market. Understanding these factors, help investors to make more informed decisions regarding buying or selling any stock.

In this regard, economic conditions of an industry can really affect the stock valuation of LinkedIn. For example, if the payroll of the all the companies operating in the social networking industry goes down, then the market value of LinkedIn can decline, as well. This is mainly because the investors will be skeptical about the overall health and investing opportunities in the industry. Similarly, market perception of the business can also affect the value of a stock. In case of LinkedIn, the stock price can vary greatly depending upon how the investors perceive information. For example, it is very critical for LinkedIn Corporation to understand how the investors perceive the news release of the company. In another instance, investors were really doubtful about how LinkedIn will perform in the long run after reaching the market value of nine billion dollars in 2011. Closing price of LinkedIn’s stock hovered around $94.25 after its day of trading in the stock market. This led to investor’s curiosity if LinkedIn is really an investor’s company or just another over-hyped sensation in social networking industry.

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