What LinkedIn Was Worth Until This Morning

SecondMarket, an exchange that lets private investors trade shares of privately held companies, revealed a short history of LinkedIn's (NYSE: LNKD  ) share price after this morning's monster initial public offering. The IPO was priced at $45, but shares soon traded at more than twice that amount, peaking at $122.

How's that compare to LinkedIn's value over the past year? See for yourself:

Source: SecondMarket. April 2011 share price extrapolated from previous month.

At $122 a share, LinkedIn trades at about 25 times forward revenue, and some ungodly multiple of earnings. How crazy is that? Really, really crazy. Best advice: Keep your distance.

Then again, investors had similar feelings toward Baidu (Nasdaq: BIDU  ) and Google (Nasdaq: GOOG  ) after they IPO'd. Both have since been massive successes, minting money for shareholders after what seemed like insane early valuations. After Google's IPO, the New York Times warned:

After a series of missteps, Google finally pulled off its much-hyped initial public offering yesterday. The good news about this unusual I.P.O., which sought to deprive Wall Street banks of full control over the sale, is that it made it easier for individual investors to buy the stock. Of course, that may also be the bad news. At its closing price of just above $100 yesterday, Google is valued at a bubbly $27 billion.

Google is now worth $170 billion, and plenty think it's still a bargain.

What do you think about LinkedIn's IPO?

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended Google and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (20) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 19, 2011, at 4:21 PM, Refreshers wrote:

    Linkedin has nothing going for it that isn't already available. If you want a job there are plenty of job site such as Monster (which is valued at 2B) out there. Facebook will make something similar to a job listing on facebook after seeing the popularity of linkedin, which leaves linkedin with what? Hellooooo 1990s again

  • Report this Comment On May 19, 2011, at 4:23 PM, hanthony1123 wrote:

    Seriously. $122 per share for a company that's barely generating any profit? Meanwhile a company like Silver Wheaton, which has an insane profit margin, is trading around $34. Go figure.

  • Report this Comment On May 19, 2011, at 5:04 PM, efeldman13 wrote:

    I bought LinkedIn this morning and sold it for a profit. Should I re-buy LNKD stock now that its gone down to about 94 dollars per share and hope it continues to grow in value like Google did, or do you think it will just hover around the same price?

  • Report this Comment On May 19, 2011, at 5:07 PM, BlueEyesGuy33 wrote:

    Linkedin is neither a Google nor a Baidu. Sure I have a profile on the Linkedin website. Do I visit it often? No. Google I use everyday. Today's action on LNKD is totally over-blown.

  • Report this Comment On May 19, 2011, at 5:12 PM, wbradfordbishop wrote:

    Google's value is the talent they have on staff and the innovating they continue to do. They continue to push envelopes and change what we expect from technology. Linkedin has a great product, but its simple, not cutting edge. How they intend to grow profits to justify this valuation is beyond me.

  • Report this Comment On May 19, 2011, at 5:49 PM, richie54 wrote:

    Tonight they're going to party like it's 1999. Just tonight.

  • Report this Comment On May 19, 2011, at 6:37 PM, Gonzhouse wrote:

    This will be the easiest red-thumb CAPS point I've ever picked up.

  • Report this Comment On May 19, 2011, at 6:37 PM, memoandstitch wrote:

    Imagine how much facebook would fetch...

  • Report this Comment On May 19, 2011, at 6:49 PM, abhartiya wrote:

    I know I shouldn't have bought the LinkedIn share but I did at 109$ odd. And, now I don't see it going any higher than what it is right now. Should I sell it and just get away with the little loss or wait for it to bounce back, maybe over a long term?

  • Report this Comment On May 19, 2011, at 7:03 PM, dbtheonly wrote:

    abhartiya,

    There's the question. As Shakespeare wrote, "Do we suffer the slings & arrows of outrageous fortune, or by opposing, end them?" Having made what now looks like a mistake, do we sell it & take the loss, or do we hang on & hope.

    First question: Will the loss help you on your taxes? If so dump & run.

    Second question: Why did you buy in the first place? Are the reasons still valid? If so hold on.

    Third question: Do you really need the bucks? Can you "afford" to wait? This ties back into question 2.

    Having bought precipitiously; it looks like you might sell equally precipitiously. Panic buying & panic selling only help the Broker rack up his fees.

    As Kipling said, "If you can keep your head about you, when all about are losing theirs..."

  • Report this Comment On May 19, 2011, at 8:34 PM, GregLoire wrote:

    There are plenty of good reasons to argue that LinkedIn might be overvalued, but current revenue is not one of them. The company is still focusing on user growth rather than monetization. Perhaps the latter will come with time, or perhaps it won't.

    For anyone who saw The Social Network, Eduardo was not the hero of that film.

    You might as well be evaluating Tesla by its current revenue. The debate here should really be about the company's future revenue prospects, not with how its current revenue aligns with its current share price.

  • Report this Comment On May 19, 2011, at 8:38 PM, TMFHousel wrote:

    <<For anyone who saw The Social Network, Eduardo was not the hero of that film.>>

    That's actually a very good point.

  • Report this Comment On May 19, 2011, at 8:47 PM, ffbj wrote:

    "Or take arms up arms against a sea of troubles."

    Personally I don't understand this one at all. I mean ok if you managed to get in early around $60 a share, then dumped it around $100, well then I applaud your timing. For those who bought in the 90's well, that's a toughie.

    I would dump it before the shorts get in and send it into the nether regions, back down around where it started.

  • Report this Comment On May 19, 2011, at 9:01 PM, shanelofgren wrote:

    Just because GOOG eventually succeeded doesn't mean it was smart to buy it right after its IPO. That's the equivalent logic to saying that because a racehorse won, we all were fools for not going out and betting on it. GOOG at the time was a long short that happened to work out where so many others had failed. Eventually GOOG became a better buy when it proved itself. LinkedIn might eventually do the same and, if it does, maybe it will be worth buying. But right now what you're seeing is pure speculation and Ponzi buying (everyone is hoping that someone else will drive the price even higher). If you think you're a master of crowd psychology and can predict fickle moods then place your bets, but otherwise there are plenty of other equities with higher expected values.

  • Report this Comment On May 19, 2011, at 9:22 PM, TheDumbMoney wrote:

    Greg and Shane are 100% correct.

    I particularly like this: "The company is still focusing on user growth rather than monetization. Perhaps the latter will come with time, or perhaps it won't."

    And this: "Just because GOOG eventually succeeded doesn't mean it was smart to buy it right after its IPO. That's the equivalent logic to saying that because a racehorse won, we all were fools for not going out and betting on it."

    Does anyone have any idea what LinkedIn's growth rates are for revenue or earnings/decrease in losses?

    Also, I think that if Facebook created a "Business Filter" option of sorts, whereby you can create a business-optimized version of your facebook account (parallel to your regular account), which would only contain basically the information you give to LinkedIn, and in which you turn off things that you would not want going to a business contact, it could basically kill LinkedIn.

    Facebook has historically focused on the concept of friendship, but there is nothing inherent about that, and there is no reason why it will continue. Many companies had and have facebooks, too.

  • Report this Comment On May 19, 2011, at 10:02 PM, extremist wrote:

    It might be little more than a glorified electronic rolodex, but my conservative estimate is at least $250, perhaps very soon. Just like the tulip mania and similar bouts of craziness, the hype around social networks will simply have to run its course. After all, LinkedIn is grabbing handfuls out of the same pot that sustains Google and pretty much any other big Internet firm. That pot may be huge, but it's not inexhaustible, particularly when many takers start to drain it.

  • Report this Comment On May 20, 2011, at 12:01 AM, techlvr11 wrote:

    So youtjink linkedin isn't unique?

    In last 3 years all job interviews I received were through linkedin.unless a recruiter has solid profile, I don't even talk to them. On the other hand, my profile on dice and monster resulted in a hundred useless emails from resume collector. I have since stopped updating those but the junk doesn't stop.

    That's the power of linkedin. It is my professional face, my work identity in my control.

    If a a candidate doesn't have linkedin profile, he won't be even in the race. If linked in charges people for profiles, most will pay - nay,will have to pay.

  • Report this Comment On May 20, 2011, at 3:01 AM, liyuyi82828 wrote:

    Linkedin is nothing compare with Google.

    Why fool put this article on front page?

  • Report this Comment On May 20, 2011, at 8:06 AM, dengkane wrote:

    Another Internet bubble is rising.

    Many valuable IT companies are valued very low by the market. But Internet companies are still the hot choices of many investors.

    My personal site: top-stock-picks.com

  • Report this Comment On May 20, 2011, at 9:36 AM, fennecfoxen wrote:

    LinkedIn is a solid company. It's just not a solid $9 billion company; that's somewhat ludicrous. The ~$4 billion IPO valuation was probably more in line with reality.

    It's got excellent growth potential, sure, but it also has plenty of risk, and as always: when in doubt, you're probably underpricing the risk.

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