After months of rumors & speculations, LinkedIn came out with its IPO on Thursday 5/19 to a better-than-expected Wall Street response. The upscale spike within first few hours of trading shocked not just those at LinkedIn but raised some Silicon Valley eyebrows too. At one time, the stock was trading at $103.28 on Friday (that is close to $10B valuation for the company). I remember there were talks of $4.5B market share being too-much for LinkedIn only last week & if you combine it with the ongoing US stocks pessimism, it makes the initial success at NYSE even more astonishing! Looking beyond the nascent shock & awe, I guess the stock price might just stabilize a bit in short to medium period.
It’s too soon to predict & I do find sense in talks of Morgan Stanley, BoA under pricing the stock, but even then the underdog LinkedIn is a clear winner standing at $8.8B market cap at close on Friday. Every now & then, tech journalists would write off LinkedIn, declare its death. The journey has not been easy for LinkedIn which is the only Y2K startup to have survived since 2001. It has seen through both the recession periods & still stands strong.
Riding the web 2.0 wave:
LinkedIn’s stock, the best initial performer after the Google IPO, has a lot to do with the fact that it is the first of gen-Y companies to go public. Let’s face it – no one can actually predict how large this social wave (or a possible tech bubble) is going to be. LinkedIn dared to come out of the murky secondary market & in all fairness, Reid Hoffman truly deserves what he’s getting. The overzealous Wall Street may be a little misplaced but IMO, it’s always better to make it large while it lasts!
Inspiration for others:
Facebook, Groupon, Zynga, Twitter (hotties of the secondary market) will be keenly following the progress of the LinkedIn stock though they have missed the virgin excitement. Out of these, for Twitter, it will make sense to wait until it establishes an earning/profitable business model. While for Facebook & Groupon, IPO looks tempting at this stage. In fact, Facebook has hinted at going public by next year or so.
What does the future look like for LinkedIn?
For a conventional stocks analyst, 9 billion-ish valuation for a company that has net income of $2.08M in Q1-2011 after $15.4M of net earnings in 2010, is humongous & perhaps over the top. But we have seen technology stocks perform crazy before & there’s no reason why LinkedIn can’t do it.
For starters, LinkedIn has information about people that makes its competitors envious. Data-wise, LinkedIn is far better placed than Facebook with all that teenager crap. It also has one of the least annoying ad-networks. It has undergone a lot of ‘social’ changes to make professional interconnect easier for its users (e.g. follow utility, profile updates notifications, premium accounts, job suggestions) over the last year or so.
Reid Hoffman & team have to figure out a way to earn more revenues & to keep the stock up. For now though, they can soak in all the appreciation and celebrate!
Another great post.
I liked that you did not whine too much about the IPO priced too cheap.
FB will be keeping a close watch and going forward, strong chance that all web 2.0 stocks will be priced bullish..
I firmly believe that $45 a share was NOT a below-par pricing. It was a genuinely well-placed prediction after all.
I came across this wonderful response to allegations that the stock under-priced, I might add it to the post itself. Check it out: http://epicureandealmaker.blogspot.com/2011/05/jane-you-ignorant-slut.html
It’s got a lot I agree with.
And yes, advantage FB for sure!
It’s been a roller-coaster for $LNKD but it has remained upwards of $75 which is good. It has definitely sustained well so far.
I suspect Groupon to file for an IPO before FB which is enjoying the secondary market trading at this moment.
It will be closely watched how $LKND utilizes all this money to make itself better – as you mentioned in one of your earlier blogs, startup to INC journey is much more harder!
Yup, it is a great start but tougher road lies ahead. $LNKD needs to prove that the valuation & price rise are deserved.
With this initial capital though, Reid Hoffman can do wonders – my guess!
Thanks for your comment!