LinkedIn made $15 million dollars last year, and they just raised $660 million dollars out of the gate in this IPO. And, this IPO values LinkedIn at somewhere close to 6.5 billion dollars.<p>A valuation of 6.5 billion dollars on $15 million net income. Let that sink in.
Two quotes:<p>"Let's start by defining 'investing.' The definition is simple but often forgotten: Investing is laying out money now to get more money back in the future — more money in real terms, after taking inflation into account." [1]<p>-Warren Buffett<p>"Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return — even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result." [2]<p>-Charlie Munger<p>- - -<p>[1] <a href="http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/" rel="nofollow">http://money.cnn.com/magazines/fortune/fortune_archive/1999/...</a><p>[2] <a href="http://ycombinator.com/munger.html" rel="nofollow">http://ycombinator.com/munger.html</a>
I thought this might be interesting, John Cassisy at the New Yorker claims:
"One more cautionary note: Don’t take too seriously the headlines you will see about the market valuing LinkedIn at $8-9 billion. Using the oldest I.P.O. trick in the book, the underwriters only issued 7.84 million shares, thereby creating an artificial shortage. Even at $90 each, the value of LinkedIn’s publicly issued stock is just $706 million. The $8-9 billion figure comes from taking the market price and applying it to the rest of the company’s common shares, more than eighty million of them which haven’t been issued yet. It may well be several years before all of these shares are trading on the open market. At that point, we will have a better idea of what LinkedIn is really worth."<p><a href="http://www.newyorker.com/online/blogs/johncassidy/2011/05/linkedin-ipo-party-like-its-1999.html" rel="nofollow">http://www.newyorker.com/online/blogs/johncassidy/2011/05/li...</a>
Really the only people making any money here are the underwriter and venture capitalists who took this company public - the guys who pumped up and are now dumping these shares. While they're high fiving eachother with a job well done it's setting up the exact same crash that happened last time.
Suppose there is a tech/social web bubble, is there anything anyone would advise for starting your own startups? E.g:
stick with the day job;
bootstrap rather than take money;
postpone and launch in 2 years;
get in fast while the hype is still there?<p>Any startup survivors from the last one wish they'd done things differently?
LinkedIn listed 7.8M shares. So far today, and we are only half way through the day, there have been 29.5M transactions - which means each LNKD stock has been bought or sold on average 4 times<p>edit: wrong multiple
As usual, Paul Kedrosky has some of the best observations:<p><a href="http://www.bloomberg.com/blogs/paul-kedrosky/2011/05/some-linkedin-lessons-implications.html" rel="nofollow">http://www.bloomberg.com/blogs/paul-kedrosky/2011/05/some-li...</a>
The IPO should have probably been priced a little higher. Closer to $70 or $80, given this type of demand. The people that were in on the IPO got a very nice return this morning, provided the stock price stays this high for a little while. Also, LinkedIn would have raised something closer to $700 million or more, had the IPO been priced more accurately. Does anyone know who the underwriters were?
There's going to be a lot more angels running around town the next few years with money to invest.<p>Things are going to get very, very interesting.<p>Next up, Zynga, Twitter, Facebook, Yelp, Pandora...
<i>Main Street investors clamored for the job networking site's stock, which had only been available to the country's biggest mutual funds, pension funds and other major institutional investors in Wednesday's IPO.</i><p>This was from a story on Yahoo finance today. Seems Main Street investors weren't welcome yesterday. Their demand for shares today could well be driving the price. I like LinkedIn, but this feels unduly speculative.
Great news for related sites too -- I'm thinking of Quora and Namesake.<p>Quora has been able to thrive and create a truly compelling site in a short time, even with LinkedIn Answers having so many numbers in its favor.<p>Namesake has been getting traction and executing well -- their valuation has definitely just gone up as well.
called it: <a href="http://news.ycombinator.com/item?id=2563481" rel="nofollow">http://news.ycombinator.com/item?id=2563481</a><p>should have put a lot of money on that. I think it will hit $18-20B market cap in no time
The CEO commented that he was "happy" with the IPO price. Given that CEO's generally are not happy with leaving 100% on the table, I would surmise he knows it's overvalued.
I was going to type a fairly lengthy comment, but I think I'll just do a one sentence sum-up (and hope I don't get downvoted for it!): This is yet another strong piece of evidence that we're in a bubble.
This is nothing more than a legalized pyramid scheme.<p>The valuation of LinkedIn has nothing whatsoever to do with the business, its performance, future potential or current assets.<p>It has everything to do with demand for its stock being high.<p>At some point, the fad will die and a whole host of small time investors will lose their shirts (or houses, life savings, retirement funds, what have you).<p>Like all pyramids, if you can get in now you probably will make some money, but don't ever fool yourself into thinking this has bearing whatsoever on anything but your position in the pyramid. This <i>will</i> come crashing down. LinkedIn is NOT a $4 Billion company. It's just a matter of when.