LinkedIn on Thursday had a wildly successful IPO, with shares of the company jumping after the opening bell so quickly that questions were raised about how the company's initial price was set.
LinkedIn's IPO could also provide an indication about the prospects for other social networking considering their own IPOs, including Facebook, Groupon, Twitter, and Zynga.
LinkedIn, Mountain View, Calif., was founded in 2003 as a social networking provider for business professionals.
LinkedIn priced its shares at $45, but saw the price jump to $80 per share at the opening bell and rise to $122.70 before settling at just over $100. The jump was reminiscent of the kind of IPOs seen in the dot-com days, given that LinkedIn has yet to generate a profit.
As a result of the IPO, LinkedIn said it raised $352.8 million in gross proceeds.
That wasn't nearly as much as it should have grossed, said Henry Blodget, former Wall Street analyst and now editor-in-chief of Business Insider.
Blodget, in his Thursday column on the IPO, said LinkedIn "got screwed" out of $130 million because of the poor job done its underwriters, including Morgan Stanley and Bank of America, did in setting the IPO price.
LinkedIn opened at $80 just a day after those two investors sold the stock to their best institutional clients at $45 per share, Blodget wrote.
"The value of LinkedIn-the-company, it seems safe to say, has not appreciated by 90%+ in the past 12 hours," he wrote. "And that means that, on its underwriters' advice, LinkedIn sold its stock way too cheaply. It also means that the institutional investors who bought LinkedIn's stock last night are high-fiving each other this morning, celebrating their instantaneous 90% gain. (Lots of them are probably also dumping some stock)."
The IPO was good news to LinkedIn's initial investors who invested over $100 million in the company since 2003 and who now own a combined stake worth about $6.7 billion, according to Bloomberg.
CNBC reported that the IPO pipeline currently has about 175 companies, which is the largest number of companies looking to break into the stock market in 11 years.
CNBC, quoting Peter Falvey, a managing director at Morgan Keegan, said LinkedIn will have a positive impact on the tech equity market.
“Clearly, there is a strong interest from investors in digital media and e-commerce companies like Facebook, Twitter, Groupon and Zynga, as well as a host of smaller, fast growing companies. Each of them will execute very well received IPOs,” Falvey said, according to CNBC.
This article originally appeared at crn.com
Issue: 315 | May 2013
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