LinkedIn Corp’s shares more than doubled in their public trading debut on Thursday, evoking memories of the investor love affair with Internet stocks during the dotcom boom of the late 1990s.
The professional social networking company, which began in one man’s living room less than a decade ago, is now worth more than motorcycle maker Harley Davidson Inc and ratings company Moody’s Corp.
“I got here at 6am. We’ve been celebrating since then,” one Linked-In employee said in the parking lot of the company’s headquarters in Mountain View, California.
“We recognize that there’s potentially a bubble right now,” said the employee, who spoke on condition of anonymity.
Shares in LinkedIn, which rose as much as 171 percent in their first day of trading on the New York Stock Exchange (NYSE), closed at US$94.25, more than 109 percent above the US$45 IPO price.
Only days ago, LinkedIn proposed a price range for the IPO that valued it at just over US$3 billion. Now, after its first day of trade, it is worth nearly US$9 billion, adding to concerns that social networking company valuations are out of whack with their earnings potential.
“It seems to bring back memories of the tech bubble,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “Based on what I know it seems investors are a little overly enthusiastic.”
LinkedIn is the first prominent US social networking company to publicly test just how hungry investors are for social media companies such as Facebook, Groupon and Twitter, which are widely expected to go public in coming months.
“It’s an inevitable process for us, the next thing that happens,” -Facebook chief operating officer Sheryl Sandberg told the Reuters Global Technology Summit on Thursday.
Similar to Facebook, LinkedIn allows users to create profile pages with a photo and details about themselves, but it is largely used for professional rather than social personas, and is basically an online database of electronic resumes.
The company’s net income attributable to common stockholders last year was US$3.4 million on net revenue of US$243.1 million. LinkedIn has said it does not expect to be profitable this year.
LinkedIn chief executive Jeff Weine shrugged off worries that the pricing underestimated the appetite for the stock.
“Speaking for myself, personally I’m not even thinking twice about where the price is today and leaving money on the table or even anything remotely along those lines,” he said, adding that the stock “will take care of itself.”
He also cautioned against viewing LinkedIn as a proxy for other potential big-name IPOs, saying those stocks would be driven by their own business prospects.
Weiner, who sold about 5 percent of his holdings in the offering, made US$5.2 million on the IPO. His remaining stake in LinkedIn is worth just above US$200 million.
LinkedIn’s co-founder, ex-PayPal executive Reid Hoffman, made US$5.2 million by selling less than 1 percent of his shares. His remaining stake in the company — almost 22 percent of the voting power — is now worth about $1.8 billion.
The company raised US$352.8 million on Wednesday by selling an 8 percent stake, or 7.84 million shares, for US$45 each.
LinkedIn’s shares were sold at about 17.5 times its sales for last year. They are now worth 37 times last year’s sales. Google Inc’s shares are valued at just under six times last year’s sales.
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