Shares opened on its first day of trading yesterday at $83 – almost double its initial IPO price of $45.
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The market frenzy that ensued following opening of New York Stock Exchange, what the Wall Street Journal has called the “outsize demand” for a company which is now valued at, $85bn, despite making a modest profit of just over US$15 million (on $243 revenue) last year.
In 2009, it made a loss of $4 million. But what a difference a year makes. By the time the NYSE closed at 4pm, shares were worth an eye watering $94.25 – a 109% lift – which must have made traders gasp into their PC screens as it means the company is now worth a phenomenal $8.9 billion.
This exceeded all expectations for Reid Hoffman 2002 online start up, which had been tipped to float for around US$3bn-$3.3bn value and initial prices were as low as $32-35 per share.
“If anybody thinks that the tech investing sector didn’t change today, they’re absolutely crazy,” Lee Simmons, editor of IPO research service Hoover’s told the Silicon Valley Times. “Today is going to be a benchmark of how these stocks enter the market in the future.”
However, another respected industry figure muttered the messianic share rise “is like a movie I’ve seen before,” referring to the previous dot com bubbles that crash landed.
The Silicon Valley giant plans to sell 7.8m shares in total, although its chief isn’t getting too excited, attributing the rise to the vagaries of the market, rather than the kick off of dot com 2.0, which many analysts fear.
“This isn’t necessarily indicative of anything. The market will do what it will do,” said Jeff Weiner, LinkedIn CEO.
Many in Wall Street also believe the professional social network has benefitted from being the first of the online startups to hit the trading floor and had say Facebook gone first it would be a very different story.
It is the biggest market debut for a tech company since Google floated back in 2004 for $85 a share which then hit $100 soon after.
One of the oldest social networkers around, the company founded in 2002, has morphed into the biggest social network/ head hunting service for employers and recently began charging for some of its services with 100 million registered users.
It has also open the floodgates for its counterparts including the darling of social networks, Facebook, which has a currently value of $79 billion on private exchange SharesPost, and seven time the user numbers with 700 million and counting, to follow suit.
Facebook chief Mark Zuckerberg will sleep soundly tonight.
Others like Twitter and even Groupon (which Google bid $6bn last year) may also go public and this enthusiastic response from Wall Street is giving them a strong indication of what’s to come.
So who were the big winners? Reid Hoffman who still retains over one fifth of the company (20.1 per cent) as wel as current CEO and employees as well as several venture capital outfit.