Shares in business networking site LinkedIn doubled in value on their trading debut overnight, pushing the value of the company up to $US10 billion.
Having been initially priced at $US45, shares at one point hit $US122, in what analysts are predicting as a sign of the largest tech bubble since the late 1990s. LinkedIn sold 7.84 million shares at $45 each. At $100 a share, the company is worth $10 billion, making Reid Hoffman, its founder, a billionaire with a 20% stake.
LinkedIn, which allows its members to manage their professional networks online, says it plans to use the money generated from its IPO to fuel expansion.
With more than 100 million users, LinkedIn makes most of its money from fees charged for better access to the data on its website.
It earned $US3.4 million on revenue of $US243 million last year, but expects to lose money this year as it invests in new products and more computers to run its services.
LinkedIn’s initial public offering of stock raised a total of $US353 million. The company’s take works out to $US217 million, before investment banking fees and other expenses.
The hike in the IPO price range has prompted speculation of another dotcom boom. Since the dotcom bubble burst in 2000, LinkedIn is the first company that has lifted its price range by so much ahead of its float.
It is also the highest market value for a US internet company appearing on the New York Stock Exchange since Google went public in 2004.
However, LinkedIn’s valuation may eventually look modest compared to other internet companies tipped to go public in the next 18 months, including Facebook, Twitter, Groupon and Zynga.
Foad Fadaghi, research manager at market analyst firm Telsyte, says the LinkedIn IPO has been “a long time coming”.
“It indicates that we’re going through a period that many see as an opportunity to raise capital. The market is hot with liquidity – there’s a lot of money in the market right now and the cost of borrowing is quite low,” he says.
Fadaghi says the emerging trend is synonymous with the first dotcom boom, when a lot of companies started to IPO at the same time, and expects it to continue.
“Is it a bubble? It’s certainly showing signs of bubble behaviour. Whether that results in a crash is hard to say,” he says.