Sunday, November 19th, 2017

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LinkedIn IPO Reminiscent of the Dot-Com Boom

LinkedIn surged in trading.LinkedIn – the professional social networking site which has been one of the few to flourish alongside Facebook – hit the New York Stock Exchange with a massive IPO on Thursday.

The company’s shares were priced at $45 for the first day of trading, and within minutes of the trading floor opening they’d surged as high as $90 per share.

A nice boost for the company’s investors and stakeholders, then – but where is this massive optimism coming from? LinkedIn’s most recent profitable year was 2010, according to its SEC filings, generating a small but respectable $15.4 million in earnings off revenue of $243 million. Before that, however, its balance sheet was awash in red ink.

Of course, everyone is searching for a big hit – the next Facebook, and ultimately the next Google. With the initial sale raising the network more than $350 million, LinkedIn should have plenty of cash to expand and develop. In order to do so, it will have to grow both ad revenue and its core revenue stream, paid business subscriptions to site. These are largely used for recruiting, particularly for highly skilled or executive positions.

“The valuation for LinkedIn is rich,” Michael Moe, the chief investment officer atĀ GSV Capital Management, told Bloomberg Television yesterday. “To earn the valuation, it has to continue to grow very, very fast.”

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