LinkedIn's stock price doubles in first day of IPO

Today was the first day for people to purchase and trade stock in the business oriented social networking web site LinkedIn and it was a very good day for people who decided to put their money it. Venture Beat reports that on the first day of trading on the New York Stock Exchange, the share price of LinkedIn went up from its starting price of $45 all the way up to a high of $122 a share. The price went down to $94 a share before the market closed today. Even at that price that means the market cap for LinkedIn is currently set at a whopping $9 billion. That's much higher than the $4 billion cap that the company set for itself before today's IPO launched. Keep in mind that the company had revenues in 2010 of just $243 million and a profit of only $15.4 million for that year.

One of the big questions is if LinkedIn's stock will stay at that high price or will it go back down. We have seen this happen with the China-based Internet company RenRen which is now trading below its first IPO price after launching earlier in May  Also, as this Forbes blog post states, there's a fear that this kind of IPO could be the sign of a new Internet Bubble like we had in the late 1990s when Internet companies seemed to be going public daily. When that bubble burst, the result was massive layoffs, a huge stock market drop and tons of companies shutting down.

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8 Comments

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not like you'd be able to buy it anyway, unless you had 500k plus and regularly invested, or were in the company...it's hard to get IPO stock. The rich keeping the rich rich and the poor poor.

SirEvan said,
not like you'd be able to buy it anyway, unless you had 500k plus and regularly invested, or were in the company...it's hard to get IPO stock. The rich keeping the rich rich and the poor poor.

what does that have to do with keeping the rich richer and the poor poorer?...the company is publicly available and if you believe in it, you can buy the stocks even if you have $1,000 to spare with any brokerage account.

those who get the IPO price (underwriters and wealthy clients) also take the risk of losing their capital if the stock goes down.... for ex. Renren, Blackstone, Forest Investment Group

Arpit said,

what does that have to do with keeping the rich richer and the poor poorer?...the company is publicly available and if you believe in it, you can buy the stocks even if you have $1,000 to spare with any brokerage account.

those who get the IPO price (underwriters and wealthy clients) also take the risk of losing their capital if the stock goes down.... for ex. Renren, Blackstone, Forest Investment Group

It has everything to do with it. Lets say I want to buy linkedin stock on opening day, and want to earn a lot of money doing it. It is next to impossible for Joe Investor to buy at the $45/share price. There are some exceptions, but normally it is hard for average investors to buy at the IPO offering. So while JP Morgan, LinkedIn Employees, or anyone else who got shares early at 45$, I have to buy at ~100$ a share. My potential to make a profit off of this stock has gone down considerably, while those who buy at 45$ a share have now more than doubled their investment. If tomorrow the stock goes to 105$ a share, those initial investors that got the good price make a 60$/share profit, or 133%, I make a 5$ profit, or 5%.

so you do the math. Lets say it opens at 100$ a share, and I invest 2000$. At the end of the day it goes up to 105$ a share. My 20 shares (2000/100) x 5$ increase =100$ profit, not including transaction fees. If i was able to buy at 45$, then instead of 100$, I'd be able to make 2666$ profit (2000$/45$=44 shares... 44 shares x 105$ = 4666$ - my 2000$ investment = 2666$. Which is better, 100$, or 2666$?

Edited by SirEvan, May 20 2011, 3:31pm :

Web 2.0, meet DotCom Bubble 2.0.

It is sheer lunacy to put a company that does not even have revenues of $1 billion at a market capitalization of $9 billion. This kind of bogus monetization hurts the economy and the employees. Those that get in early and leave just as early make out like bandits; I cannot help but wonder how well this describes the company's leaders. I wish I didn't have morals and had bought as much stock as I could at $45 a share just to sell at twice the <i>stock</i> value. Because LinkedIn is only worth that much in a stock exchange computer.

In no other form of reality are they worth nearly what they started at, nor what they are currently.

pickypg said,
Web 2.0, meet DotCom Bubble 2.0.

It is sheer lunacy to put a company that does not even have revenues of $1 billion at a market capitalization of $9 billion. This kind of bogus monetization hurts the economy and the employees. Those that get in early and leave just as early make out like bandits; I cannot help but wonder how well this describes the company's leaders. I wish I didn't have morals and had bought as much stock as I could at $45 a share just to sell at twice the <i>stock</i> value. Because LinkedIn is only worth that much in a stock exchange computer.

In no other form of reality are they worth nearly what they started at, nor what they are currently.

It will most likely settle down after a while. The buzz around LinkedIn recently will have artificially inflated the prices.

pickypg said,
Web 2.0, meet DotCom Bubble 2.0.

It is sheer lunacy to put a company that does not even have revenues of $1 billion at a market capitalization of $9 billion. This kind of bogus monetization hurts the economy and the employees. Those that get in early and leave just as early make out like bandits; I cannot help but wonder how well this describes the company's leaders. I wish I didn't have morals and had bought as much stock as I could at $45 a share just to sell at twice the <i>stock</i> value. Because LinkedIn is only worth that much in a stock exchange computer.

In no other form of reality are they worth nearly what they started at, nor what they are currently.

it actually debuted at around $82/share in the retail market...the hype propelled it to 122 and then it tempered down to 94. granted it's quite a premium for the company but it's not nearly as bad as dotcom bubble 1.0, because in most cases the valuations quickly decrease to reflect the fundamentals of the stock unless of course the stock is being manipulated by funds (ex. apple AAPL) or you've got irrational exuberance where the stock gets propelled on trend/speculation and one day all of a sudden, tanks (ex. opentable OPEN). with that said, i'm not sure about linkedin's intrinsic value but i wouldn't be surprised if it trades at it's current level and if the earnings are good, then goes up further.