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May 19, 2011

LinkedIn IPO launches into stratosphere

linkedin.jpg

Buckle in, folks! It's gonna be a wild ride from here on in.

LinkedIn Corp., the social media network for workers, went public today and its shares, which started out priced at $45, zoomed up to $90.50 in morning trading. It's currently at around $85, as of 10:40 a.m. today. That means, on paper at least, LinkedIn was valued upwards of $8.5 billion.

The Wall Street Journal story this morning noted that investors are hungry for similar IPO stories. By "similar stories," the WSJ probably means everyone is waiting to see how IPOs for Facebook, Twitter, Groupon and Zynga might do.

LinkedIn has been the under-rated, less sexy social media company, compared with those other four. But it was the first one to go IPO. I'd hate to be the last of those companies doing an IPO. Who'll have money to invest at that point?

Seriously though, I have to wonder if how well LinkedIn performs in the next couple of quarters will either whet investors' appetites for more social media companies on Wall Street, or turn them off on such company stocks. It's not a given that a big first day in the stock market for LinkedIn presages successful IPOs for Facebook, Twitter, Groupon and Zynga. LinkedIn, for one, has a lot of work to do for those investors who bought in between $45 and $90 today.

As Michael Moe, chief investment officer of GSV Capital Management in Woodside, California, told Bloomberg News yesterday: “The valuation for LinkedIn is rich. To earn the valuation, it has to continue to grow very, very fast.”

A lot can happen in the next couple of quarters. Internet competitors and the speed in which the market changes is faster than the speed at which Wall Street bankers operate. If LinkedIn knocks it out of the park the next couple quarters, that bodes well for its peers. If not, well, maybe we'll see more IPOs. Or maybe instead we'll see some acquisitions and mergers.


This is an archived version of the technology blog. For updated coverage, see the current baltTech location: baltimoresun.com/balttech

Comments

So what you are saying is the underwriting banks underpriced the IPO by 100%, thus cheating LinkedIn of half of the funds that could have been raised.

Now who got the extra money? That would be the underwriting banks and their cronies who bought at the lower offering price. This was predictable and business as usual with my 401k and your buying high.

Maybe some critical thought here is warranted instead of the puff on how high the issue went??

PJ - LinkedIn retained somewhere around 45% of the equity, so they reap some of the benefits of the stock doubling in price. Second, what we are seeing in the market is pent up demand for IPOs - the market will correct itself. I thought about investing but I don't understand how LinkedIn is going to generate revenue (are there enough premium accounts being sold to be valued so high? are there enough eyeballs that ad revenue will generate that much income?) - and my rule is, if I don't understand it, I don't invest in it.

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About Gus G. Sentementes
Gus G. Sentementes (@gussent on Twitter) has been writing for The Baltimore Sun since 2000. He's covered real estate, business, prisons, and suburban and Baltimore City crime and cops. He was one of the first reporters at The Sun to use multimedia tools and Web applications -- a video camera, an iPhone -- to cover breaking news. He hopes to cover Maryland geeks and the gadgets and Web sites they build, and learn -- and share -- something new every day.

Gus has a wife, a young daughter and two feuding cats. They live in Northeast Baltimore.
This is an archived version of the technology blog. For updated coverage, see the current baltTech location: baltimoresun.com/balttech
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