LinkedIn share price more than doubles in NYSE debut
NEW YORK (Reuters) - LinkedIn Corp's shares more than doubled in their public trading debut on Thursday, evoking memories of the investor love affair with Internet stocks during the dot-com boom of the late 1990s.
The professional social networking company, which began in one man's living room less than a decade ago, is now worth more than motorcycle maker Harley Davidson Inc and ratings company Moodys Corp.
"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.
Shares of LinkedIn, which rose as much as 171 percent in their first day of trade on the New York Stock Exchange, closed at $94.25, more than 109 percent above the $45 IPO price.
Bankers typically try to price an IPO so that the stock rises about 15 percent on the first day of trading: enough to reward investors who made a bet, but not so much that the company and original shareholders feel they were short-changed.
Only days ago, LinkedIn proposed a price range for the IPO that valued it at just over $3 billion. Now, after its first day of trade, it is worth nearly $9 billion, adding to concerns that social networking company valuations are out of whack with their earnings potential.
"It seems to bring back memories of the tech bubble," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Based on what I know it seems like investors are a little overly enthusiastic."
One hedge fund manager who flipped his holdings in the low-80's described how difficult it was to get shares. "I got 500 shares and was told to consider myself lucky," he said.
"There are billion-dollar institutions that are not getting any stock," he said, recounting something he learned from salesperson at one of the lead banks.
Underwriters for the IPO were led by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan.
LinkedIn is the first prominent U.S. social networking company to publicly test just how hungry investors are for social media companies such as Facebook, Groupon and Twitter, which are widely expected to go public in coming months.
"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.
LinkedIn's rise was the biggest for a newly public Web stock since shares of Qihoo 360 Technology Co, China's third most-popular Internet company, rose 134 percent in their NYSE debut in March.
LinkedIn is one of few foreign social networking companies that can operate in China, where it has about a million users. Many other sites including Twitter, Facebook and Google don't have a presence in the world's biggest Internet market.
Similar to Facebook, LinkedIn allows users to create profile pages with a photo and details about themselves. But it is largely used for professional rather than social personas, and is basically an online database of electronic resumes.
The company's 2010 net income attributable to common stockholders was $3.4 million on net revenue of $243.1 million. LinkedIn has said it does not expect to be profitable in 2011.
As of March 31, LinkedIn had 1,288 employees and 102 million registered members. As of Thursday, its market value per employee was almost $7 million and about $87 per user.
LinkedIn Chief Executive Jeff Weine shrugged off the trading craze or even worries that the pricing underestimated the appetite for the stock.
"Speaking for myself, personally I'm not even thinking twice about where the price is today and leaving money on the table or even anything remotely along those lines," he told Reuters, adding that the stock "will take care of itself."
He also cautioned against viewing LinkedIn as a proxy for other potential big-name IPOs, saying those stocks would be driven by their own business prospects.
Weiner, who sold about 5 percent of his holdings in the offering, made $5.2 million on the IPO. His remaining stake in LinkedIn is worth just above $200 million.
LinkedIn's co-founder, ex-PayPal executive Reid Hoffman, made $5.2 million by selling less than 1 percent of his shares. His remaining stake in the company -- almost 22 percent of the voting power -- is now worth about $1.8 billion.
The company raised $352.8 million on Wednesday by selling only an 8 percent stake, or 7.84 million shares, for $45 apiece. Because of strong demand, it increased its anticipated price range by $10 a day before the IPO to $42 to $45 per share.
LinkedIn's shares were sold at about 17.5 times its 2010 sales. They are now worth 37 times 2010 sales. Google Inc's shares are valued at just under six times 2010 sales.
"There's a lot of enthusiasm and maybe there's excess demand because there is just not a whole lot of supply of these types of companies in the market," said Scott Cutler, co-head of U.S. listings at NYSE. "That can drive a richer valuation but it's not a bubble."
Outside LinkedIn headquarters, three men approached by a reporter said they worked for a company next door.
"We don't work for LinkedIn. They are the ones driving the Lamborghinis," one joked.
There were as yet no Lamborghinis in sight.
(Additional reporting by Gabrielle Saveri in Mountain View; Edward Krudy, Rodrigo Campos, Angela Moon, Dan Wilchins, Chris Sanders, Caroline Valetkevitch, Bill Rigby and Jennifer Saba and IFR's Stephen Lacey in New York; Editing by Lisa Von Ahn, Maureen Bavdek, Robert MacMillan and Steve Orlofsky)
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