LinkedIn share price nearly doubles on debut — and even drags Germany’s Xing up with it

19/05/2011 at 4:19 pm Leave a comment

First US social networking company to test market’s appetite sees suggestion of magic Dot Com Boom days.

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Image credit: Adriano Gasparri on Flickr

Reuters is reporting that business focused social nertworking site LinkedIn has seen its shares surge 90% on its debut on the New York Stock Exchange today, with scenes that are “reminiscent of the heyday of investors’ love affair with Internet stocks in the late 1990s,” the news agency notes.

The shares rose to $85.18 during the day, up from a starting price of $45 in a floatation that values the US company at $8 billion.  No, that’s not a typo.

Now, I have written on this before when the IPO was first mooted — was LinkedIn really worth $2.5 billion (as suggested at the time) when Germany’s Xing couldn’t even scrape $300 million in public trading?

Well now that valuation seems even crazier, although it is interesting to note that Xing’s share price has also increased today by about 8%.  Xing was one of the first so-called “Web 2.0” companies to go public.  Is it riding on LinkedIn’s coat tails as the markets appreciate its value now there is something else to compare it to?

Who knows.  This does all feel like the magical days of the Dot Com Boom, which I was very much involved in as I sold a company I started with £5000 for $6 million just 18 months later (I don’t have that now by the way… it was never real).  No-one knew the rules because they were made up as we went along.  But in almost all instances, the party didn’t last and reality set in for some investors the following day after debut; for the rest when people realised that there were no New Rules and that the maths had to stack up just like they do with any valuation.  The boom turned to bust as the whole market took a kicking in 2000 and sanity returned.

And so it prevailed until people started going loopy about Facebook, Twitter and LinkedIn and silly amounts of money got poured into the companies before they had even turned a penny.  Facebook worth $30 billion?  I see only straight faces all round.  And some might be considering that a bargain now the appetite for social networking shares has been tested by LinkedIn, which in users is only an eighth of Facebook’s size.

What are your thoughs: are we seeing history repeating itself?  Or do social networking companies really represent the future?  Just add your comment below.

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LinkedIn share price nearly doubles on debut — and even drags Germany’s Xing up with it XING kills applications — so what for OpenSocial, LinkedIn and Facebook apps?

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