LinkedIn, the professional networking site – which began in one man’s living room less than a decade ago – held its initial public offering on Thursday, closing at $94.25 per share and an $8.9 billion valuation.
Shares climbed all the way to $122.70 yesterday’s morning before settling below the century mark. More than 30 million shares of the company changed hands on Thursday. At $94 per share, LinkedIn is now valued 36 times more than the company’s revenue ($243 million), generated in 2010.
“I got here at 6 a.m. We’ve been celebrating since then,” one LinkedIn employee said in the parking lot of the company’s Mountain View, California headquarters. “We recognize that there’s potentially a bubble right now,” said the employee, who spoke on condition of anonymity.
To get an idea of how big LinkedIn is now, here are some other well-known companies with valuations in the same range: Tiffany & Co. ($8.9 billion), Royal Caribbean Cruises ($8.7 billion), Electronic Arts ($8 billion) and Hyatt Hotels ($7.9 billion).
For comparisons sake, Google traded at 5.5 times its 2010 revenue at the close of trading on Wednesday, while Salesforce.com traded at 10.4 times its revenue and recently public Demand Media traded at 4.4 times its revenue.
LinkedIn has become the first social networking company to sell stock on the public market, setting the precedence for other social networking companies to do the same.
“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. In recent years, only Chinese Internet stocks have seen such exuberant first-day trading on U.S. exchanges.
However, experts are concerned. According to them, the exuberance surrounding social media as a whole is knocking the company’s offering out of perspective.
“It really is the sign of an irrational exuberance associated with anything that has social in it,” said Forrester Research Senior VP and social media analyst Josh Bernoff. “What you’re seeing here is enthusiasm that goes way beyond what the prospects are for the company itself.”
The day’s events are reminiscent of the 1990s, when it was common to see new internet companies hit stock prices that seemed far out of proportion. Consider Yahoo!, who in 1996 rose 154 per cent on its first day in trading and VA Software Corporation, whose first day stock offering went up 700 per cent in 1999.
Could this be the start of a new technology bubble as some analysts fear? Matt Brischetto, Pacific Crest Securities VP for internet and digital media investment banking does not think so.“The difference in this from 2000 and 2001 is that these are real companies that are making money,” Brischetto said.
He also says the performance may not last, “IPOs over the past year or two generally perform very well on the first day, but you have to wait a few weeks or even a quarter in order to really see where the fair market value is.” [via Mashable, Tech Crunch and Reuters]