LinkedIn Corp (LNKD)’s Billion-Dollar Share Sale: Should You Be Buying?

However, this looks a bit more interesting: “We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments.”

After all, LinkedIn Corp (NYSE:LNKD) has already made several acquisitions, including mobile newsreader Pulse and online presentations site SlideShare. For my money, LinkedIn Corp (NYSE:LNKD) is building a war chest for just such bolt-on acquisitions.

LinkedIn Corp (NYSE:LNKD) is a terrific business with a genuine competitive advantage in the network effect: If you were going to join a professional networking site today, why would you consider joining any site other than LinkedIn Corp (NYSE:LNKD), unless you are in an extremely esoteric field? Similarly, once you’ve joined, why would you consider defecting to another site?

Does this mean you should be buying the stock today? Not so fast! When a company is selling shares, it usually selects a time when it will get more than its money’s worth (assuming it isn’t in financial distress, which isn’t the case here). At 143 times estimated earnings per share for the next 12 months, I’d recommend investors consider the sort of growth that is embedded in that multiple before buying the shares.

The article LinkedIn’s Billion-Dollar Share Sale: Should You Be Buying? originally appeared on Fool.com and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of LinkedIn.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.