After their disappointing IPO earlier this year – stock has dropped from 17€/share to roughly 7.20€/share at the opening bell this morning – Viadeo’s really been struggling on the Euronext stock market. Competition with LinkedIn has stiffened, and while private investors may be happy to offload Viadeo onto the public market, some simple math suggests that ‘wall street’ doesn’t see much value in this newly public company.
If you assume that the Market Cap of Viadeo is based on the total amount of money raised by private investors, plus the value (or future value) created by the company:
Market Cap = Sum of Funds Raised + Value Created by the Company
~€75 M = ~ €50M (Ventures) + ~€25M (IPO) + Value
~€75 M = ~ €75M + Value
Value = ~ €0
This week, the market capitalization of the company is ~€75 million; however, taking into account the ~€25 Million that the company raised in its IPO and the ~€50 Million that the company raised from private investors, we see that the market cap of Viado is nothing more than the sum of the money the company has raised to date.
In other words, ‘Wall Street’ thinks Viadeo is worthless.
Viadeo is going to need a serious make-over if it hopes to find a place in the digital economy. One of the biggest issues that ‘local’ professional networks are dealing with is that, as the global economy & Internet-enabled economy spreads to every sector around the world, professionals in key companies in any sector are choosing LinkedIn, largely for its international reach and network effect (it’s already publicly demonstrated its ability to seduce top CEOs and Leaders through its LinkedIn Influencers program). The trick-down effect is that anyone who wants to be those people, or who is N-1 in their company, will also go to LinkedIn. And this carries down through middle management all the way down to interns.
Viadeo is still generating significant revenue today; however, it seems that the revenue generated just doesn’t compensate for the money they’ve spent to date, or Wall Street’s opinion of whether that revenue will grow or srhink in the coming months.