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.
Shares of the online professional social networking company closed at $94.25, 109 percent above their $45 initial public offering price. They rose as high as $121.97, in their first day of trading on the New York Stock Exchange.
Just two weeks ago, LinkedIn proposed a price range for the IPO that valued it at just over $3 billion. Less than a decade ago, the company was nothing more than an ambitious idea and a computer in one man's living room.
Now, its $8.9 billion market value makes it larger than Harley Davidson Inc, Moodys Corp and Chipotle Mexican Grill Inc.
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.
LinkedIn is the first prominent U.S. social networking company to publicly test how hungry investors are for social media companies such as Facebook, Groupon, Twitter and Zynga.
Such exuberant debut trading in recent years has been the prerogative of Chinese Internet stocks. LinkedIn shares marked the biggest first-day price jump since shares of Qihoo 360 Technology Co, China's third most-popular Internet company, rose 134 percent in their NYSE debut.
Like Facebook, Mountain View, California-based LinkedIn allows users to create profile pages displaying a picture and details about themselves.
While Facebook often has more informal profiles that may include a photo album from a recent trip, for example, LinkedIn is seen as the place for a professional persona. The profile pages are basically an online database of electronic resumes.
The company's 2010 net income was $3.4 million attributable to common stockholders on net revenue of $243.1 million.
As of March 31, LinkedIn had 1,288 employees and 102 million registered members. Based on LinkedIn's current market value, each of those users is valued at about $96.
MILLIONAIRES AND BILLIONAIRES, OH MY!
LinkedIn Chief Executive Jeff Weiner, a newly minted millionaire, 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 said, 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 also be driven by their fundamental value.
Weiner, who sold about 5 percent of his holdings in the offering, made $5.2 million on the IPO. Based on the latest stock price, his remaining stake in LinkedIn is worth about $208 million.
LinkedIn's co-founder and ex-PayPal executive Reid Hoffman made $5.2 million selling less than 1 percent of his shares. His remaining stake in the company -- 21.7 percent of the voting power -- is now worth about $1.8 billion.
The company raised $352.8 million on Wednesday by selling 8 percent of the company, or 7.84 million shares, for $45 apiece. The company increased its anticipated price range by $10 on Tuesday to $42 to $45 per share.
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 shareholders feel they could have made much more.
The company's shares were sold at about 17.5 times its 2010 sales. They are now worth 37 times the company's 2010 sales. By comparison, 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. That can drive a richer valuation but it's not a bubble, said Scott Cutler, co-head of U.S. listings at NYSE.
Underwriters on the IPO were led by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan.
(Reporting by Clare Baldwin and Alina Selyukh. Additional reporting by Edward Krudy, Rodrigo Campos, Angela Moon, Dan Wilchins, Chris Sanders, Caroline Valetkevitch and IFR's Stephen Lacey; Editing by Lisa Von Ahn, Maureen Bavdek and Robert MacMillan)