LinkedIn share price more than doubles in NYSE debut

Reuters News
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Posted: May 19, 2011 2:31 PM

By Alina Selyukh and Clare Baldwin

NEW YORK (Reuters) - 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 soared as much as 171 percent, or $76.97, to $121.97 in afternoon trading on the New York Stock Exchange -- far exceeding the $45 initial public offering price.

The stampede brings the valuation of LinkedIn, which less than a decade ago was no more than an ambitious idea and a computer in one man's living room, to as high as $11 billion, depending on the stock price at the moment.

Just two weeks ago, LinkedIn proposed a price range for the IPO that valued it at just over $3 billion.

By way of comparison, LinkedIn's current market value of $9.8 billion is larger than Southwest Airlines Co NYSE Euronext, Clorox.

LinkedIn is the first prominent U.S. social networking company to publicly test just how hungry investors are for anything social media-related on the Web such as Facebook, Groupon, Twitter and Zynga.

Such exuberant debut trading in recent years has been the prerogative of Chinese Internet stocks, unmatched by their U.S. peers. LinkedIn is the first U.S. Web company to replicate the jump, marking the biggest first-day price jump since shares of Baidu Inc, a Chinese Internet search engine, rose 354 percent in their Nasdaq debut in 2005.

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 -- which are, in turn, far from echoes of the dot-com bubble.

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 almost $230 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 nearly $2 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.

From the midpoint of the price range to the current price, shares have more than tripled. 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 its selling shareholders feel that they could have made substantially more.

"The public market demand turns out to be even stronger, substantially stronger than private market transactions have been implying," said Jay Ritter, IPO expert and professor of finance at University of Florida.

Private-market trading of LinkedIn shares before the IPO gave the company a valuation of about $3 billion, he said.

The company's shares were sold at about 17.5 times its 2010 sales. By comparison, Google Inc's shares are valued at about six times 2010 sales.

Renren Inc shares rose 4.38 percent while MySpace parent News Corp rose 2 percent. Google Inc, owner of YouTube, was little changed.

Underwriters on the IPO were led by Morgan Stanley, Bank of America Merrill Lynch and JPMorgan.

(Reporting by Clare Baldwin and Alina Selyukh; Editing by Lisa Von Ahn, Maureen Bavdek and Robert MacMillan)