Buying frenzy sees LinkedIn stock surge after IPO
Friday 20 May 2011
LinkedIn, the social networking website for professionals, debuted on the New York Stock Exchange to a frenzy of buy orders yesterday, sending shares to more than double the float price.
Retail investors, speculators and institutional investors alike rushed to get their hands on a piece of the eight-year-old company, the first chance for many of them to invest in a major Western social media company while the likes of Facebook and Twitter remain in the wings as private companies.
At its high point yesterday, LinkedIn was valued at about $12bn, and the 20.1 per cent stake still held by the company's founder and chairman Reid Hoffman was worth $2.4bn – about four times what he expected earlier this month.
LinkedIn originally proposed a float price in the range of $32 to $35, but after heavy investor demand they were priced on Wednesday night at $45. By late morning, the stock was trading above $125, a debut that led to inevitable comparisons with tech stock flotations at the height of the dot.com bubble in 1999 and 2000.
Jeff Weiner, the chief executive, whose own stake was valued at $280m at one point during the opening stampede, dismissed the comparison with the dotcom era. "The fundamentals of the companies that are category leaders in terms of their respective social platforms are very, very different from what we saw in the late 90s and early 2000s," he said.
"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."
Mr Hoffman and Mr Weiner both sold $5.2m of shares at $45 as part of the float. Goldman Sachs, an early investor in LinkedIn, sold its entire stake in the offering, netting $39.2m. If it had held on a few hours and sold at yesterday's peak, it would have received more than $100m.
Any investors intending to hold LinkedIn shares for the long term are betting it will continue to dramatically increase its number of users – which now stand at 100 million in 200 countries – and find ways to increase profits exponentially. Its profits were just $2.1m in the first three months of this year.
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