Business networking site's flotation shares double in a day, in clear sign of new technology craze
LinkedIn, the first major US social network to go public, saw its shares more than double as they debuted on the New York Stock Exchange to a bidding frenzy from investors.
It makes Reid Hoffman, LinkedIn's founder and largest shareholder, a billionaire and comes as larger social network firms including Facebook and Groupon are lining up floats. The rise in shares is likely to drive up the prices of those sales too.
LinkedIn shares had been priced at $45 (�27.73) before the flotation and shot up as high as $122 at one point and ended the first day of trading at $94.25. The company is now valued at more than $10bn, a huge increase for a firm that was recently valued at about $2.5bn.
LinkedIn's stellar debut is the clearest sign yet of appetite among investors for shares in the new generation of technology and digital media companies. As companies attract ever-larger valuations, some analysts are warning of a bubble similar to the one that burst at the turn of the millennium.
Alan Patrick, co-founder of analyst Broadsight, said LinkedIn's debut was "all in all a classic dotcom IPO [initial public offering] with perhaps the proviso that there is a bit of revenue there".
LinkedIn's flotation makes it easily the highest valuation of a US internet firm since Google went public in 2004. The business networking site has about 100 million users and turned a profit of $15.4m on revenues of $243m in 2010.
Though other social networks are far larger, notably Facebook with about 700 million users worldwide, the business orientation of LinkedIn's members make them potentially more valuable to advertisers.
The company managed to grow through the recession and turned profitable last year, having made operating losses from 2007 until 2009.
The stock offering follows the equally frenzied debut of Renren, a social media firm often described as China's Facebook. Renren debuted on the New York Stock Exchange earlier this month and raised $743m. But the shares are now trading below their initial price of $14.
LinkedIn's chief executive, Jeffrey Weiner, told the Wall Street Journal he was not concerned about the stock's first-day performance. "To be honest with you, I didn't give a lot of thought to what the opening would be like," Weiner said. "This isn't necessarily indicative of anything. The market will do what it will do. What we are completely focused on is our long-term plans and our fundamentals, and getting that right."
LinkedIn's backers ? Bain Capital Ventures, Goldman Sachs and McGraw-Hill ? offered 3m shares in the IPO. LinkedIn offered a further 4.8m shares. Other investors ? Sequoia Capital, Greylock Partners and Bessemer Venture Partners, which together own about two-fifths of the company ? did not participate in the offering.
LinkedIn's flotation is expected to spark a social media goldrush, with some of the internet's most talked-about ? if not profit-making ? companies going public. Facebook employees are currently selling shares in the privately-held company that value it at between $80bn and $100bn. Groupon, the online discount business which spurned a $6bn offer from Google last year, raised $1bn in new financing in January and is expected to float this year. The company has been valued at $20bn. Zynga, the maker of popular Facebook games, FarmVille and CityVille, is believed to be worth $10bn.
One New York stockbroker who did not buy LinkedIn shares said: "If I had, I would be out in the bar celebrating. The price is the price. If people think that this is what it's worth, this is what it's worth."
Patrick said LinkedIn was just the beginning. "I don't think it's the big IPO in my bubble-meter, it's a John the Baptist type," he said.
Source: http://www.guardian.co.uk/technology/2011/may/19/linkedin-shares-surge-on-flotation
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