LinkedIn Shines in IPO Debut
LinkedIn made its IPO debut last night and while the underwriters – Morgan Stanley, Bank of America Merrill Lynch, and JP Morgan – severely underestimated the worth of the shares, the stock has more than doubled its valuation in less than twenty-four hours. While the low valuation could’ve cost the company a surplus $130 million, their revenue also exceeded the initial estimate by about $1 billion. Some headliners focus on the almost comical loss of Wednesday’s cheap pricing, but most remain awed by the climbing numbers.
Trading under the symbol LNKD on the New York Stock Exchange, shares for the eight-year-old networking site peaked at $122 on Thursday afternoon, giving the company one of the biggest first-day gains of 2011. With a 130% increase, the price of the share nearly doubled by Thursday morning. The last time this happened was with Nymex Holdings, Inc. in November 2006.
With 7.8 million shares to go around, the initial public offering on Wednesday night was at $45 per share, having steadily increased throughout Thursday. Business Insider’s Henry Blodget wonders if bankers were clueless as to how much investors would be willing to pay for the stock. He believes that the undervaluing screwed the company out of $130 million. Either way, LinkedIn CEO Jeff Weiner was all smiles this morning, telling Bloomberg TV that he was “very comfortable” with where IPO was priced.
Prior to going public with the stock, LinkedIn said in a regulatory filing, “We cannot assure you that the price of our Class A common stock will equal or exceed the price at which our securities have traded on these private secondary markets.” Apparently they truly didn’t know just how well the stock would do.
The company raised $353 million in an IPO, valuing the LinkedIn at $4 billion, a pretty significant increase from its $16 million profit over the last four quarters. This is the largest valuation for a U.S. Internet company since Google went public in 2004. The high demand of these stocks most likely flashes blinding signals of what is to come for Internet services willing to make their shares public. Since LinkedIn rapidly proved worthy of its IPO introduction, it would be wise for other companies to jump on the bandwagon. Many have already created a buzz about going public within the next two years. These companies include Twitter, Groupon, Facebook, and Zynga. Social media sites and digital networking forums have been unstoppable in their expansion and relevance in today’s webs of fast-paced communication. As audiences continue to grow, investors continue to see how profitable these websites are.
LinkedIn’s stock market success can most likely be credited to its business model. It is free for users – currently boasting over 100 million profiles – and businesses profit from the professional and social connections fostered by the website. It structured on a format that feeds on itself; the more people show interest and success with the website, the more people will join in on the conversation. Sometimes referred to as the “professional Facebook,” LinkedIn will now have to live up to the financial hype. Weiner stated that he hopes to put his newly acquired revenue towards hiring solutions, technology that can accelerate the product roadmap, and expansion across Europe.
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