MUMBAI: The shares of professional social networking site Linkedin soared and hit $92.99 as trading opened before settling to $84.43 showing a 87.6 per cent increase after its initial public offering on the New York Stock Exchange.
According to a company statement, the network sold 7.84 million shares for $45 each. The company has said it plans to use the money it has raised for operations and possibly to buy other companies.
"To some extent, investors are buying Linkedin because they cannot get into Facebook. People are just really desperate to get into social media," YCMNET Advisors‘ chief investment strategist Michael Yoshikami has been quoted as saying.
The pricing values the business focused networking website at $4.25 billion, a jump of nearly one-third over the course of the week, as its offering price was revised higher to reflect surging demand among investors seeking to add exposure to the burgeoning social networking space to their portfolios.
Linkedin‘s valuation, which is 17 times of its last year‘s sales of $243m, is well above that of members of the Nasdaq Composite index, where the average price ratio is just 4.3 times of annual sales.
The valuations are prompting fears of a bubble, much like that of the late 1990s. But they also reflect high hopes for social networking groups, which many investors believe will disrupt existing business models in media and the web, much as Apple did for the music and personal computer businesses.
It may be recalled that Renren, one of China‘s largest social networks, went public this month and is valued at 70 times of its last year‘s sales. Facebook, which is in the early stages of pursuing a public listing, was valued in private markets at 32 times last year‘s estimated sales as of March end, according to Nyppex, a network for trading ?shares ?of private groups.
