LinkedIn IPO Could Mean Another Dot-Com BubbleBy CIOinsight | Posted 05-23-2011
LinkedIn's (NYSE:LNKD) opening IPO price of $83 May 19 shocked the high-tech world and spawned another wave of dot-com bubble paranoia that had investment experts such as Henry Blodget cringe.
LinkedIn had raised over $100 million from Sequoia Capital, Greylock Partners and Bessemer Venture Capital Ventures, while Morgan Stanley, Bank of America, Merrill Lynch, and J.P. Morgan were the lead book-runners for the IPO. Their clients saw an amazing 84 percent return on their investments.
LinkedIn stock reached its zenith of $122.70 that Thursday before closing at $93.86, valuing the company at just under $8.9 billion. This came only two months after LinkedIn traded at $35 secondary markets such as SecondMarket.
All this for a professional social network with 100 million users that made profit of $15.4 million in 2010 on sales of $243 million from a blend of recruitment services, online advertising, and premium subscriptions.
LinkedIn's gaudy IPO numbers, spurred by giddy investors, recall the days when Pets.com and TheGlobe.com were ridiculously valued in the dotcom gold rush before crashing and burning.
Most financial analysts are aghast and running scared. Normally, bullish tech analysts told eWEEK they were also surprised at LinkedIn's performance.
They believe LinkedIn is showing a market desperate for a social network to publicly trade in. Now people wonder what Facebook, Twitter, Groupon, currently estimated to be worth $75 billion, $10 billion and $6 billion, respectively, would be worth if they opened up trading to the masses.
"For the average investor, the LinkedIn IPO is a proxy for other investments in the social media space, such as Facebook, that the person-in-the-street can't currently participate in," Gartner analyst Ray Valdes told Eweek.
Added Forrester Research's Josh Bernoff:
"Investors who don't want to miss out on owning part of the social explosion are definitely buying LinkedIn for that reason. LinkedIn has a bright future, but I worry that this level of run-up - and the inevitable inability to meet these sky-high expectations - will distract the company."
Count Charlene Li, founder of research firm Altimeter Group, among the LinkedIn IPO cheerleaders.
For more, read the eWEEK article: LinkedIn IPO Triggers Dotcom Bubble Debate.