LinkedIn has Impressive IPO, but Concerns Surface over Possible 'Bubble' for Tech Stocks


LinkedIn reached over $100 a share in trading on Friday – just one day after it was offered as an IPO.

LinkedIn priced the stock at $45 on Wednesday. The stock closed at $94 Thursday afternoon.

TechCrunch reports LinkedIn as of Friday morning had almost a $10 billion market share.

“If LinkedIn can maintain anywhere near this valuation level, it’s a good sign for other tech companies who are looking to IPO this year,” says Tech Crunch.

Social media stocks appear especially sought after by eager investors, Bloomberg reports.

“We knew this was going to be a super hot IPO and gives us further evidence of the enormous appetite for this wave of next-generation Internet companies,” Paul Bard, director of research at Renaissance Capital LLC, said in an interview with Bloomberg. “You are going to see more companies go public that will try to capitalize on this wave of interest.”

There has been come concern, however, there could be a bubble for technology stocks.

Bloomberg reports that Lawrence Summers, an economist who has run both the U.S. Treasury Department and Harvard University, said during a recent conference, “Who could have imagined that the concern with respect to any American financial asset, just two years after the crisis, would be a bubble? Yet that concern is increasingly raised with respect to American technology, with respect to certain other American assets.”

In addition, TMC CEO Rich Tehrani said in a recent blog post that, “This sort of meteoric growth is reminiscent of the dotcom bubble and this certainly isn’t the first time in recent memory where arguments have been made by both sides that the tech valuations are too high.”

At any rate, Bloomberg reports that the early private investors in LinkedIn have done well.

For example, Sequoia Capital’s investment is now worth about $1.59 billion, Greylock Partners’ investment is worth about $1.32 billion, and Bessemer Venture Partners’ investment is worth about $431.5 million, Bloomberg said.

LinkedIn plans to use the money raised by the IPO to fund current “operations and expand the business, including possibly buying other companies or technologies,” Bloomberg reports.

LinkedIn has what it calls “the world’s largest professional network on the Internet” with over 100 million members who live in over 200 countries and territories, according to information on the company’s site. LinkedIn started in 2002 in the living room of co-founder Reid Hoffman.

“LinkedIn’s incredible IPO success tells us one thing – that many other tech companies are more confident than ever been about going public,” Tehrani said in his analysis. “The company has everything going for it – it is in the social networking space and focuses on the business side where you could argue easily that there is easier money to be made than a consumer site like Facebook. Moreover, there are countless investors locked out of investing in Twitter and Facebook and LinkedIn is the only way for these people to get into the social networking investment game. Finally, the tech space has done extremely well this past year – so one can easily argue that many tech investors have made a killing and are confident they can continue to do so.”

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.

Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell

TechZone360 Contributor

Related Articles