It seems like only last week that LinkedIn's initial public offering was expected to be valued at US$ 32 to US$ 35 a share, raising US$ 260 million and giving the company a valuation of up to US$ 3.3 billion. Actually, it was only last week. Now, due to expected increased demand, the company has raised its share price to US$ 42 to US$ 45, giving it a valuation of up to US$ 4 billion.
Are the 90s Back?
The LinkedIn IPO is not just important for itself, reported the Wall Street Journal, but also for the slavering hordes of pre-IPO social media companies, including Facebook Inc., Twitter Inc., Zynga Inc. and Groupon Inc., that are waiting to see how LinkedIn does before jumping onto the IPO bandwagon. LinkedIn has to make things look good enough for its investors and the companies following it, yet not be too greedy and scare away potential investors.
Writes the Journal:
[T]he underwriters have to be absolutely sure they have the price right" on LinkedIn, said Scott Sweet, managing director of research firm IPO Boutique. "There is no way they would risk blowing up this deal when they very well could be chosen for Twitter, Groupon, Zynga or Facebook's [IPO] down the road."
On the Other Hand
But in an interesting Point-Counterpoint, a different Wall Street Journal writer blogs that LinkedIn has a number of reasons to inflate its IPO, and that in fact it may be way overvalued. Writes Evan Newmark:
After all, what is the sense in putting a $4.3 billion valuation on a company with slowing revenue growth and zero projected profits for 2011 or in paying $43.50 for a share that post-IPO will have a tangible book value of just of $3.38, or one-thirteenth what you just paid."
So shareholders Goldman Sachs, investors Sequoia and Greylock, LinkedIn CEO Jeff Weiner and underwriter Morgan Stanley all have a vested interest in making this IPO knock it out of the park, Newmark says.
On the board of LinkedIn sits Reid Hoffman, Skip Battle and Mike Moritz, David Sze -- a who’s who of Silicon Valley. If LinkedIn is up 50% a week after the IPO, Morgan Stanley can kiss the Facebook and Zynga IPOs goodbye."
We'll all find out on Thursday.