LinkedIn IPO rises 109% on first day, continues to rise

By Matt Krantz, USA TODAY
Updated 31m ago

Investors got a flashback to an era when Internet stocks ruled Wall Street.

LinkedIn (LNKD), the largest professional-networking website, more than doubled to $94.25 on its the first day of trading Thursday after its initial public offering. It's one of just seven IPOs to double in its first day since 2001, after the dot-com bubble burst, Renaissance Capital says.

And the stock continued to rise Friday.

Such a powerful opening for a Internet stock — its 109% rise was the best since China's Qihoo 360 jumped 134% in March — is likely to reawaken the investing public's interest in the Internet's latest buzzword: social networking.

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"LinkedIn is the first one (social-networking company) out," says Matt Therian of Renaissance. "LinkedIn has validated there's quite a bit of interest."

LinkedIn's strong reception with investors is being viewed as a milestone for the IPO market because it is a:

•Stage-setter for other social-media IPOs to come. While investors are eagerly awaiting the IPOs of Facebook and Twitter, for now, the only option is LinkedIn, says Francis Gaskins of IPOdesktop.com.

Big winner
Linked's first two days on the Nasdaq
Adding to the scarcity of the deal is the fact the offering was somewhat small. Just 7.8 million, or 10%, of its shares were offered, Renaissance's Therian says.

•Sign investors are willing to take chances on up-and-coming companies. While LinkedIn has more than 100 million registered users, and turned a profit of $15 million last year, the company projects it will lose money this year, Gaskins says.

LinkedIn's success comes amid a slowly recovering IPO market. This year there have been 63 IPOs, up from 52 through May 2010 but well down from the 86 through May 2007, Renaissance says.

•Rich valuation for a young company. The company is valued at $8.9 billion at Thursday's closing price, making it worth more than 167 companies in the Standard & Poor's 500. Investors are paying 578 times what the company earned in 2010 and 37 times its revenue.

Despite talk of LinkedIn being a throwback to the bubble years, its first-day gain of 109% doesn't come near the 698%, 606% and 525% first-day rises by the record-holders VA Linux in 1999, TheGlobe.com in 1998 and Foundry in 1999, says Jay Ritter of the University of Florida.

But Gaskins still wonders if investors are overdoing it. "Investors are buying on emotion," he says.

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