As my DailyFinance colleague Dawn Kawamoto reported, LinkedIn (LNKD) made its initial public offering (IPO) Thursday. And like that, it transitioned from a privately-held company whose ownership was limited to the wealthy, the well-connected and the insiders, into one in which regular people can invest.

At least, theoretically we can. But in reality, that's pretty hard to do for two reasons. First, demand for a piece of the pie was so high during that first day that less than 5% of people who tried to buy shares were able to get as many as they wanted, according to The New York Times. Secondly, because of that incredible demand, the stock is unexpectedly expensive, closing yesterday at $94.25 per share after a high of $122.70 earlier in the day. Even the company executives were surprised by the high numbers. They'd priced the shares to start at $45.

In late afternoon trading Friday, the stock was selling near $93, which still sounds expensive to me. It also makes me wonder: With IPOs occurring fairly regularly on Wall Street again, why all the fuss about this one? What's so irresistible about an 8-year-old Internet company that sells advertising and social networking -- and actually lost money in both 2008 and 2009?

Those in the enthusiastic "buy" camp would reply LinkedIn is a new type of Internet company. Unlike all those tech companies that boomed -- and then busted -- during the Internet bubble of the late 1990s, LinkedIn doesn't just make money by forcing its users to look at ads. The company also generates income by charging recruiters and subscribers for networking services that brought in $15.4 million in profits for the company last year.

Waiting for the Next Wave of Internet IPOs


That LinkedIn does more than sell ad space is important because advertisers can be incredibly fickle. One minute they want nothing more than to place jingles and banners on your website. The next, they're taking their business elsewhere.


People are also excited about LinkedIn simply because there aren't that many publicly-traded Internet companies out there anymore after the industry's spectacular collapse in 2000. Hungry investors who have been sitting on their hands, waiting to put some money into the tech sector, are thrilled at the chance. The general consensus is that if the company has made it this long in such a saturated, competitive field, there must be something to it.

Plus, LinkedIn cleverly kept supply low. They offered 7.84 million shares for sale, which sounds like a lot but is actually less than 10% of the company. Relative rarity is making the stock that much more appealing.

So, is it worth all the hype? That depends. Clearly, the fact that shares are trading for more than twice the anticipated $45 indicates that a lot of people believe in the company's ability to make money.

But not everyone is on board. Trefis, a website that analyzes how a company's products affect its worth, values the shares at just $30. They argue that almost 50% of LinkedIn's business comes from charging companies for recruitment services, and that these revenues are likely to decline in the short-term because most large companies have already signed up for those services, forcing LinkedIn to turn to smaller companies that can't pay as much.
In any case, the fact that investors are going bonkers for this stock is probably a sign that their rekindled love affair with the tech market is just beginning. Word on the street is that some of the darlings of the Internet world, including Facebook and Groupon, will also launch their IPOs in the next 12 months. Those companies, too, could debut with seriously hype-driven prices, especially in the early going.

Loren Berlin is a columnist at DailyFinance.com. She can be reached at loren.berlin (at) teamaol.com. You can follow her on Twitter @LorenBerlin, or on Facebook.


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innovator14

ron paul 2012 , its all I really want to hear.

shed the left right paradigm ,

individualism over collectivism”

May 22 2011 at 4:14 PM Report abuse rate up rate down Reply
Dereck

This as many other Publicly Traded Companies may be defrauding you!

Nobody's alerting the Public to the fact that the entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09. Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf
seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86. The person they sued was the "World Fortune Owner" who "Counterclaimed" and won! Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corp." which means "No Corporation can hold Shares" which means every Stock Exchange on the Planet is Officially a "Ponzi Scheme" by default! Also, the World Fortune Owner is being denied his right to "Face his Accusers" in Lawsuits in Courts based on "Felonious Evading and Eluding" by Governments and Corporations. No Government Attorney's, CEO's or Corporate Attorney’s have any valid Contracts to Represent as Attorney’s for Plaintiff or Defendant in a Court of Law, any of the Government Agencies(which are also Corporations) or Corporations involved, especially in "Financial Settlements,Payouts, and Stock Shares"!

Check out:
Corporations: Formation and Financing
http://myweb.csuchico.edu/~evu/Education/bLaw2038.htm

May 22 2011 at 1:54 PM Report abuse rate up rate down Reply
lgpudles

There are really two stories here. The first story is the one about the trusted investment banker that valued the company at half of what the public valued it so it could help certain insiders make money. That story has been written about extensively but in essence the company loses because the public would have and did pay substantially more.

The second story is why are the public and investors enamoured with this stock. Its simple. This is a real online community that anyone who is in business participates in almost daily. Its a true business network that has become the cognitive center of the business networking world in the same way we think of Amazon for books and google for search. My sense is FB would get the same treatment and Groupon would not.

May 22 2011 at 12:29 PM Report abuse rate up rate down Reply
kluj1

stocks worth about 10 bucks. if linkedin was gone tomorrow nothing would change in anyones lives !! Get Out ~ we are at the top of a bear market rally !!

May 22 2011 at 9:43 AM Report abuse +2 rate up rate down Reply
sitemfg

Stay away from this one.

May 22 2011 at 7:39 AM Report abuse +2 rate up rate down Reply
john damore

we canot depened on the futures We must make are own future.by john damore W.H.C.A. retired.

May 22 2011 at 12:38 AM Report abuse rate up rate down Reply
David

The pump and dumpers are at it again. When will the naive public learn and stop being fleeced by Wall Street? The game is fixed and I wouldn't trust anyone on Wall Street.

May 21 2011 at 3:08 PM Report abuse +4 rate up rate down Reply
downyours

Actually "everyone" isn't. Most of us don't give a damn.

May 21 2011 at 1:53 PM Report abuse +3 rate up rate down Reply
jesuaphn

A few people will become very rich and a lot will loose money, break even, or make very little. It has happened before and it will happen again. Greed!

May 21 2011 at 1:39 PM Report abuse +3 rate up rate down Reply
crimeslawyer

We have seen it all before. A sucker is born every minute. Everyone wants something for nothing. It is the new gold rush fever. People are desperate for something new. Obama has made us so depressed by dividing us in to bickering groups for his polictical advantage. This has at least given us something that makes us feel united, at least for the moment.

May 21 2011 at 12:40 PM Report abuse +2 rate up rate down Reply