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LinkedIn wows Wall Street

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By: Jessica Van Sack | May 19, 2011

Stokes fears of Web 2.0 bubble

LinkedIn exploded onto Wall Street yesterday in a dramatic debut that sets the stage for other online networking sites to go public — conjuring up both fond memories and fears of the 1990s dot-com bust.

“It’s a door-opener,” said John E. Fitzgibbon Jr. of IPOScoop.com. “The sun has come up on this market.”

In the biggest public trading start since Google took to the market in 2004, shares of the professional networking site more than doubled, ending the day at $94.25 after reaching a height of $123, an astonishing price for a company that experts say was trading on the private market in the mid-$30s. LinkedIn’s market value now stands at $10 billion, causing analysts to wonder not if, but when, it will fall.
 
“There a valuation vacuum that exists with this group of stocks,” said David Menlow of IPOfinancial.com. “There is no standard out there that can even be considered as sensible.”

The Mountain View, Calif.-based company is the first social networking site to go public. Analysts were split over whether LinkedIn’s surge would speed a public offering by social networking powerhouse Facebook. The discount shopping site Groupon is also reportedly waiting in the wings.

“This is good news for the social media companies,” said Kathy Smith, principal of Renaissance Capital, an IPO advisory firm, adding that the volatility should make investors cautious. “Better news would be if it was up 30 percent and then over the next six months got up to 100 percent.”

All told, LinkedIn raised $352.8 million in its initial public offering — more than the $243 million in revenue it earned for all of last year.

“I’m a little disturbed at the amount of activity in the private market,” said Roger Kay of Wayland-based Endpoint Technologies Associates. “It smells a little bubble-ish to me.”

But LinkedIn’s CEO Jeff Weiner said he’s “very comfortable” with the price range.

“We spent a lot of time with the right kind of investors — folks who understand the story, the fundamentals, who are in it for the long haul,” Weiner told Bloomberg News, later adding: “In terms of today’s initial trades, we’ll leave that to the marketplace.”

Espen Robak, president of Pluris Valuation Advisors, said LinkedIn’s rollicking debut is “something we haven’t seen in a long while.”

“It brings back fond memories,” he said, rejecting fears of a looming bubble.

“If you compare this with the height of the bubble in 1999, companies going public then were just a business plan with an office,” he said. “This is not the case for LinkedIn. They have 100 million users. They have a real revenue line and they’re profitable. That’s very different from what was going on in the 1990s.”