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Why is Bain bailing on LinkedIn?

November 16, 2011: 10:48 AM ET

More smoke than fire behind a VC firm's plans to dump LinkedIn shares?

Bain Capital Ventures this week revealed in a regulatory filing that it plans to unload its entire remaining stake in LinkedIn (LNKD), as part of the social network's previously announced secondary offering. That works out to 3.7 million shares, or around $277 million based on yesterday's closing price. The firm, an affiliate of buyout shop Bain Capital, also sold 653,000 shares via LinkedIn's IPO this past May.

It's unusual for venture capitalists to completely exit a company once the lockup expires. For context, Sequoia Capital sold none of its LinkedIn shares at IPO, and isn't selling any now. Greylock Partners and Bessemer Partners also abstained during the IPO, and are selling just a small fraction of their shares via this new offering (10% and 10.9%, respectively). Moreover, BCV clearly made a mistake selling anything during the IPO, given that LinkedIn shares subsequently appreciated by around 66%.

So I went out in search of an explanation. The first one I heard was that the move is related to the fact that BCV currently is raising a new fund, and nothing attracts LPs like a recent distribution. But then I realized that BCV has had several distributions over the past 15 months. In fact, it may have distributed more (out of multiple funds) than the $525 million it raised for its 2009 vehicle. In other words, the paper value of LinkedIn stock should suffice. More importantly, word is that the fund may already be oversubscribed, with plans to close at its $600 million hard cap in early January.

Next, I heard that maybe this was a personality issue. Specifically, BCV first invested in June 2008 – when a guy named Dan Nye was LinkedIn's CEO. He is the brother of Ben Nye, a partner at Bain Capital Ventures, and was eventually sent packing. So did BCV just no longer have the right "relationship" at LinkedIn?

Seems not. A source fairly close to the situation – but not at BCV – tells me that I'm tilting at windmills. "Sometimes different firms just view things differently," he tells me. "I don't see anything about Bain's decision besides a pure investment decision." Another source adds:  "Every day, some people sell and other people buy about 1 million shares of LNKD. That equates to a lot of people disagreeing on whether it's a good buy or a good sell."

Unless someone has good evidence to the contrary, I'll stick with that. Unusual though it may be.

A spokesman for Bain Capital Ventures declined to comment.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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