Thu, May 19, 2011 - Page 10 News List

LinkedIn IPO stirs Internet bubble fear

DIZZYING SPIKE:A survey of investors and traders found that two-thirds think that LinkedIn’s expected share price of between US$42 and US$45 was ‘already too high’


LinkedIn, the professional-networking Web site firm, said on Tuesday it expects to be worth as much as US$4 billion when it goes public soon, sparking fears of another Internet bubble.

LinkedIn raised the share price for its public listing by about 30 percent, lifting the company’s value as high as US$4 billion and testing the market’s lust for Internet companies.

For what will be the first initial public offering (IPO) by a major US social-networking firm, -LinkedIn jacked up its expected share price for 7.84 million shares to between US$42 and US$45, just a week -after it first set a target of US$32 to US$35 per share.

The IPO on the New York Stock Exchange, as early as today, could bring in more than US$350 million.

LinkedIn, whose members cultivate and manage their careers and business networks online, said it plans to use the money raised on the stock market to fuel expansion.

However, the dizzying spike in the IPO price range has set off alarms.

According to the Wall Street Journal, it is the first time since the dotcom bubble burst in 2000 that a firm has hiked its price range by so much ahead of its share float.

The LinkedIn market debut will be the biggest in the US since Internet search giant Google went public in August 2004, IPO specialist firm Renaissance Capital said.

In a survey of investors and traders about the share pricing, financial Web site 24/ found that two-thirds thought “it’s already too high.”

Although LinkedIn more than doubled revenue last year, to US$243 million, it says it expects a loss this year and slowing growth.

The Mountain View, California-based firm swung into profit of US$3.4 million last year after a US$4 million loss the prior year.

A recent Internet market flotation has provided food for second thoughts. Investors who two weeks ago snatched up shares in social-networking site firm Renren (人人), seen as China’s answer to Facebook, have watched their shares drop by 9 percent from the IPO price — which was also hiked by 27 percent days before the subscription period.

However, Lou Kerner, an analyst specialized in social networking firms at Wedbush Securities, was not surprised by LinkedIn’s attraction.

“There’s very significant investor demand for what’s going to be the premier public equity in social media,” Kerner said, dismissing the speculation about a new Internet bubble.

The talk “misses the bigger point, which is that there is a tremendous amount of shareholder wealth being created in social media today, and there are very few ways for public investors to play it.”

For many market players, LinkedIn’s IPO is an opening act for the blockbuster float of social-networking giant Facebook, which could come early next year.

With currently more than 500 million users worldwide, Kerner estimated that Facebook’s IPO could drive the firm’s valuation to a whopping US$85 billion and to US$235 billion by 2015.

Until then, he said, investors could look at shares in companies potentially worth twice that of LinkedIn and expected to go public: online social game star Zynga and online coupon giant Groupon.

Morningstar IPO analyst Bill Buhr agrees that market appetite for social-media stocks is understandable, but not necessarily justified.

“If you consider Facebook, for instance they’re talking about a US$100 billion valuation, on US$4 billion of expected revenue, which puts them at about 25 times sales multiple. Google has a five times sales multiple,” he said.

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