To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary

Rupert Brooke, Peace

The rain stopped today. The skies opened. The trees ceased their swaying. And amidst the stillness, investors launched themselves into the market to soak up as many a share as possible of the newly listed LinkedIn.

LinkedIn soared on its release. Their shares on SecondMarket had presumed a $2b valuation. Their IPO book runners, among them Morgan Stanley and Bank of America, initially marketed a $3.5b valuation but promptly upped the ticket to more than $4b at $45 per share.

There was still money to be had on the table. LNKD, as it would be known, opened at $83 per share, almost double its offer-price. The 7.8m shares offered this morning would trade hands almost four times on volume of more than 30 million shares traded through the day. Reaching a peak of $122.70, shares settled at $94.25 at the close – 110% of their offering price.

But the smiles of fortune are fickle. Commentators expressed surprise and disdain for the excitations of the market. Herb Greenberg deplored the P/E ratio. Others called them an HR company, nothing more than Monster Worldwide (MWW) on stilts. The gainsayers offered a bleating chorus of skepticism throughout the day.

As much could be expected of any expression of enthusiasm. But it’s worth noting a handful of questions that LinkedIn’s public offering provides a unique opportunity to ask:

  1. If SecondMarket was suggesting LinkedIn should sell for $2b, what does that say about markets for unregistered stocks? Is there adequate pricing information in these markets?
  2. LinkedIn listed revenues of just over $160m for the nine months ending September 2010 in its S-1 and most likely had annual revenues of just over $200m for 2010. Most revenues derived from the job listing / HR business, followed by premium accounts. One would expect significant adoption by head hunters of premium accounts, given the increased flexibility to contact those outside of one’s network offered by these accounts. If LinkedIn’s proven revenue and growth is largely associated with HR, hiring and head hunters, if it’s not going to be be just a job-board with some advertising bolted on (a degree of which is hiring-oriented, as well), where will it derive its speculative revenue and growth?
  3. The market fought over shares of LinkedIn like junky over a score. With only $12.5m in income from operations in the first nine months of 2010, earnings for shareholders seem somewhat meager. What does this say about pent up investor-demand for high-risk, potentially high-reward companies?
  4. And for the underwriters, will the dramatic first-day run-up be viewed as a happy accident or an indication that LinkedIn was priced to benefit the legion institutional investors grubbing over their allocations rather than the shareholders?
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