LinkedIn (LNKD) IPO Leaves Wall Street Breathless
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In what some are calling reminiscent of the 1999 dotcom bubble days, the IPO for social media powerhouse LinkedIn (Nasdaq: LNKD) made a dramatic debut on the NYSE Thursday.
After pricing at $45 per share, early indications from the floor made it clear that this was not going to be your regular, everyday IPO. This one would be special and historic.
Flashes before the open had traders speechless. Indicated at $65-$70... now indicated $70-$75... now indicated $80-$85. After much anticipation it finally opened at $83, a full 84% higher.
But it didn't end there. Soon it was trading at $90 and then even higher.
Once the stock passed through $100 it was like watching the 2010 flash crash in reverse. Any stock offered was quickly bought. $102... $110.. $120. It topped out at $122.67 before feeling gravity pull it back to $100. We feel sorry for that poor sucker who bought at the top tick, but the way this thing is trading he will be made whole soon.
The amazing IPO unfolded amidst a host of doubters. The stock was being called an overstuffed pig at $45. At $120 it was laughable, but the action could not be disputed.
With 94,498,627 shares outstanding, the stock traded at a market cap of $7.8 billion based on the opening print - that is 4x AOL (NYSE: AOL).
At $122 per share, the market cap swelled to $11.5 billion – nearly Netflix’s (Nasdaq: NFLX) $13 billion.
On a simple valuation basis the stock looks ridiculously expensive. In the first quarter of 2011 the company made revenue of $99.93 million and EPS of $0.02.
However, investors are clearly not valuing this company on simple P/E or Price/Sales metrics. More likely, investors are valuing the company on a per user basis. With 100 million members, a valuation of $11.5 billion would value users at $115/per. This is a slight premium to Facebook's value of $100 per user based on a $60 billion valuation.
This could be justified as LinkedIn users could be worth a hefty premium to Facebook users since many are professionals.
Some may even suggest LinkedIn users could be worth $150 per users, or 50% above Facebook users. This could suggest a valuation of around $15 billion, or $150 per share. Crazy? Yes. Unrealistic? No.
After pricing at $45 per share, early indications from the floor made it clear that this was not going to be your regular, everyday IPO. This one would be special and historic.
Flashes before the open had traders speechless. Indicated at $65-$70... now indicated $70-$75... now indicated $80-$85. After much anticipation it finally opened at $83, a full 84% higher.
But it didn't end there. Soon it was trading at $90 and then even higher.
Once the stock passed through $100 it was like watching the 2010 flash crash in reverse. Any stock offered was quickly bought. $102... $110.. $120. It topped out at $122.67 before feeling gravity pull it back to $100. We feel sorry for that poor sucker who bought at the top tick, but the way this thing is trading he will be made whole soon.
The amazing IPO unfolded amidst a host of doubters. The stock was being called an overstuffed pig at $45. At $120 it was laughable, but the action could not be disputed.
With 94,498,627 shares outstanding, the stock traded at a market cap of $7.8 billion based on the opening print - that is 4x AOL (NYSE: AOL).
At $122 per share, the market cap swelled to $11.5 billion – nearly Netflix’s (Nasdaq: NFLX) $13 billion.
On a simple valuation basis the stock looks ridiculously expensive. In the first quarter of 2011 the company made revenue of $99.93 million and EPS of $0.02.
However, investors are clearly not valuing this company on simple P/E or Price/Sales metrics. More likely, investors are valuing the company on a per user basis. With 100 million members, a valuation of $11.5 billion would value users at $115/per. This is a slight premium to Facebook's value of $100 per user based on a $60 billion valuation.
This could be justified as LinkedIn users could be worth a hefty premium to Facebook users since many are professionals.
Some may even suggest LinkedIn users could be worth $150 per users, or 50% above Facebook users. This could suggest a valuation of around $15 billion, or $150 per share. Crazy? Yes. Unrealistic? No.
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