Mountain View-based social networking site for professionals, LinkedIn has priced its IPO at the higher end $45 a share, making it the biggest US Internet IPO since Google went public and indicates the voracious investor appetite for social networking sites.
LinkedIn and its investors, including Goldman Sachs, are selling $352.8 million worth of stock in its IPO that will be launched on Thursday and will be trading on the New York Stock Exchange under the symbol LNKD. The underwriters also have the option to sell an additional 1.1 million shares, which would bump up the total amount raised to $405 million. The $45 a share price values the networking website at slightly over $4 billion.
The IPO has whipped up a frenzy in Wall Street, especially as LinkedIn is the first social media company to go public in the United States. The IPO also values the 9-year old company at $4.3 billion, more than any U.S. Internet company at its IPO date since Google in 2004.
The confidence level of LinkedIn is also high as it was only earlier this month that the company had set its IPO range at $32 to $35 a share, which valued the company roughly at $3 billion.
Moreover, Several other social Internet companies, ranging from Facebook Inc. to Groupon Inc. have generated strong interest in private equity financings, driving up their valuations
However, the excitement surrounding the IPO may be overblown as at $352.8 million, Linkedin’s I.P.O. will be the fifth-largest offering for the Internet software and services sector in the United States, according to data from Capital I.Q. and Standard & Poor’s. Ahead of LinkedIn are Google, which raised $1.67 billion in August 2004, Navteq ($880 million in August 2004), Savvis ($408 million in February 2000) and Northpoint Communications ($360 million in May 1999)
Some market analysts are also skeptical about the IPO as based on its growth trajectory, LinkedIn is selling for roughly 46 times 2011's projected earnings i.e. the start-up's valuation is running ahead of its fundamentals.
And, though the company's revenue doubled last year ($243.1 million), there are doubts that it will be able to repeat it again. Why? Because it was only until last year that the company had been in the red every year since its 2003 inception. The only exception was 2006 when it turned a slight profit on revenue of $32 million.
Moreover, let's accept the fact - LinkedIn is no Facebook, Twitter or MySpace.
Will LinkedIn do a Google? Unlikely. Will be struggle like the so-called Facebook of China, Renren, whose shares jumped 29 percent on its first day of trading but has slumped ever since and now trading below their offering price? It's too early to say.
But let's not spoil the fun as LinkedIn will be the first social network to go public and test the public market appetite for social media stocks. And, that itself is a huge, brave step already.