My Favorite Risk Factors in the LinkedIn Registration StatementBy http://profile.typepad.com/1237764140s22740 // January 28, 2011 in My Favorite Risk Factors
LinkedIn filed a registration statement with the SEC yesterday. The draft prospectus it contains will undergo revisions before the IPO happens, but here now are excerpts of my 14 favorite risk factors from this initial filing.
- "We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our website is accessible within an acceptable load time."
- "Our U.S. corporate offices and certain of the facilities we lease to house our computer and telecommunications equipment are located in the San Francisco Bay Area and Southern California, both regions known for seismic activity."
- "Our core value of putting our members first may conflict with the short-term interests of our business."
- "If our members do not update their information or provide accurate and complete information when they join LinkedIn or do not establish sufficient connections, the value of our network may be negatively impacted because our value proposition as a professional network and as a source of accurate and comprehensive data will be weakened."
- "From 2007 to 2009, our net revenue grew from $32.5 million to $120.1 million, which represents a compounded annual growth rate of approximately 92%. We expect that, in the future, our revenue growth rate will decline . . . ."
- "Other companies such as Facebook, Google, Microsoft and Twitter could develop competing solutions or partner with third parties to offer such products."
- "As of December 31, 2010, approximately 57% of our employees had been with us for less than one year and approximately 74% for less than two years."
- "[W]e use open source software in our solutions and will use open source software in the future. From time to time, we may face claims against companies that incorporate open source software into their products, claiming ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our solutions, any of which would have a negative effect on our business and operating results."
- "In addition to hiring new employees, we must continue to focus on retaining our best talent. Competition for these resources is intense, particularly in the San Francisco Bay Area, where our headquarters is located."
- "We believe that our culture has the potential to be a key contributor to our success. . . . [O]ur initial public offering could create disparities of wealth among our employees, which could adversely impact relations among employees and our culture in general."
- "If we are unable to develop mobile solutions to meet the needs of our users, our business could suffer."
- "Our ability to maintain the number of visitors directed to our website is not entirely within our control. Our competitors’ search engine optimization, or SEO, efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking."
- "The dual class structure of our common stock as contained in our charter documents has the effect of concentrating voting control with those stockholders who held our stock prior to this offering, including our founders and our executive officers, employees and directors and their affiliates, and limiting your ability to influence corporate matters."
- "Prior to this offering, there has been limited trading of our common stock in alternative online markets [such as SecondMarket and SharesPost] at prices that may be higher than what our Class A common stock will trade at once it is listed."