LinkedIn is one of the world’s largest professional networking platforms, with over 722 million users as of October 2022. While LinkedIn is a public company that is listed on the New York Stock Exchange (NYSE), its shares are not directly available for purchase by everyday investors. However, there are still a few ways for investors to gain exposure to LinkedIn stock.
LinkedIn Corporate Overview
LinkedIn was founded in 2003 and had its initial public offering (IPO) in 2011, selling shares under the ticker symbol LNKD. In 2016, Microsoft acquired LinkedIn for $26.2 billion in cash, at a substantial premium to LinkedIn’s market value at the time. This took LinkedIn shares out of public circulation. However, Microsoft still reports LinkedIn’s financials as part of its own results.
Here are some key facts about LinkedIn:
| Headquarters | Sunnyvale, CA |
| Employees | Over 10,000 |
| Annual Revenue (2021) | $10.3 billion |
| Net Income (2021) | $2.0 billion |
| Products | LinkedIn.com, LinkedIn Learning, LinkedIn Talent Solutions, LinkedIn Marketing Solutions, LinkedIn Sales Solutions |
As this table shows, LinkedIn has grown into a highly profitable global business. While no longer publicly traded, LinkedIn continues to expand its user base and diversify its revenue streams under Microsoft’s ownership.
Microsoft Ownership of LinkedIn
When Microsoft acquired LinkedIn in 2016, it paid a substantial 50% premium over LinkedIn’s market value at the time. Microsoft saw major strategic value in owning LinkedIn to complement its other business services and products.
Owning LinkedIn gives Microsoft a major presence in social media and professional networking. It also allows integration with Microsoft’s other products like Office 365. For example, LinkedIn data can improve Microsoft Dynamics 365’s CRM capabilities.
For investors, Microsoft provides a way to gain exposure to LinkedIn, since LinkedIn’s financials are included in Microsoft’s overall results. In fiscal year 2021, LinkedIn revenue represented about 5% of Microsoft’s total $168 billion in revenue. LinkedIn also contributes significantly to Microsoft’s bottom line.
Ways to Invest in LinkedIn
While you can no longer directly buy shares of LinkedIn stock, there are still a few ways investors can gain exposure to LinkedIn:
1. Invest in Microsoft Stock
The most direct way to invest in LinkedIn is to buy Microsoft (MSFT) stock. When you own Microsoft stock, you gain exposure to LinkedIn’s performance as part of Microsoft’s business.
As mentioned earlier, LinkedIn makes up around 5% of Microsoft’s total revenue. LinkedIn revenue is reported under the “Productivity and Business Processes” segment in Microsoft’s financial statements. In fiscal year 2021, this segment generated $53.9 billion in revenue, of which LinkedIn accounted for $10.3 billion.
So when you buy Microsoft stock, about 5% of your investment is indirectly an investment in LinkedIn’s future performance and growth. Of course, LinkedIn’s results only form a small part of the overall investment thesis for Microsoft stock. But LinkedIn remains a valuable asset and growth driver within Microsoft’s broad business.
2. Invest in ETFs With Microsoft Stock
Another option is to invest in exchange traded funds (ETFs) that hold Microsoft stock, along with other technology and communication stocks.
Here are some top ETFs that provide exposure to Microsoft and LinkedIn:
| ETF Name | Microsoft Weighting |
|---|---|
| Technology Select Sector SPDR Fund (XLK) | 21.0% Microsoft |
| Vanguard Information Technology ETF (VGT) | 18.8% Microsoft |
| iShares Global Tech ETF (IXN) | 11.8% Microsoft |
| Fidelity MSCI Information Technology Index ETF (FTEC) | 18.7% Microsoft |
| Invesco QQQ Trust (QQQ) | 10.4% Microsoft |
The benefit of investing through ETFs is instant diversification. Rather than just buying Microsoft stock directly, these ETFs provide exposure to dozens or even hundreds of other tech stocks in addition to Microsoft. This helps reduce portfolio risk compared to just investing in individual companies.
3. Buy Microsoft Call Options
Call options allow investors to benefit from upside in Microsoft’s share price, without having to pay the full cost to purchase Microsoft shares outright.
A call option gives you the right, but not the obligation, to buy Microsoft stock at a predetermined “strike” price up until the option’s expiration date. If Microsoft stock trades above the strike price, the call option becomes profitable, since you can buy shares at the lower strike price and immediately sell them at the current higher market price.
For example, say you buy a call option on Microsoft with a $260 strike price that expires in one month. If Microsoft stock trades up to $280 in that month, your call option becomes very valuable, since you can exercise the option to buy shares at $260 and immediately sell them at $280. You benefit from the $20 per share gain, while only having paid a small premium to control the 100 shares with the call option.
Call options allow leveraged upside exposure to Microsoft and LinkedIn stock. The main risk is that the option expires worthless if Microsoft stock stays below the strike price. So call options provide a risky but potentially lucrative way to invest in Microsoft and LinkedIn.
Risks and Downsides of Investing in LinkedIn
While the above methods allow exposure to LinkedIn stock, there are some risks and downsides to consider:
Limited Upside
With LinkedIn folded into Microsoft, investors don’t have direct access to any outsized upside in LinkedIn’s stock specifically. Even if LinkedIn performs very well, it will only move the needle slightly for Microsoft’s overall valuation. So the potential gains are limited compared to when LinkedIn was a standalone company.
Lack of Transparency
Microsoft does not break out full financial statements and metrics for LinkedIn. Investors have to rely on limited data that Microsoft provides, without complete transparency into LinkedIn’s operations and performance.
Integration Risk
There is execution risk in Microsoft effectively integrating a large acquisition like LinkedIn. If Microsoft fails to fully capitalize on synergies, it could negatively impact LinkedIn’s performance going forward as part of the Microsoft family.
Dilution of Focus
Being owned by a massive conglomerate like Microsoft could lead to lost focus at LinkedIn. LinkedIn benefits from operating independently with its own corporate vision rather than being one small division within a tech giant.
So while Microsoft ownership provides resources, there are also risks of LinkedIn becoming less innovative and more bureaucratic under a mega-cap parent company.
Conclusion
While direct investment in LinkedIn is no longer possible after its acquisition by Microsoft, investors still have options to gain exposure to LinkedIn stock. The closest proxy is to invest in Microsoft, since LinkedIn’s financials roll up into Microsoft’s overall results. LinkedIn accounts for around 5% of Microsoft’s total revenue.
Alternatives include investing in ETFs focused on tech and communication stocks or using call options to benefit from upside in Microsoft’s share price. However, the lack of transparency and limited upside for LinkedIn present some downsides to indirect investment. Overall though, Microsoft does provide the best available means to invest in LinkedIn’s continued success and growth.