Thursday, May 19, 2011

LinkedIn stock jumps in value at launch, then settles at around $85; WSJ screams "Bubble!" prematurely?

The Wall Street Journal screamed "Bubble Alert!" as LinkedIn's stock rose in early trading following the company's IPO launch. But by the time the WSJ's story hit their website, LinkedIn's stock has already fallen from its high of $92.99 a share to below $80 as I write this.
The day before the stock's introduction, analysts were raising their target prices to around $45 per share and speculating that this price was probably far too high for a company that generated $15 million in profits last year.

At the higher valuation of $45 a share, analysts would be pegging the value of LinkedIn at a little over $4 billion, still very high based on current profits, but then IPOs are not about present day performance but expectations of future growth. At $90 a share, however, the WSJ may have a point.

Already today LinkedIn's stock has jumped around wildly but continues to settle back in around $85.

Update: New numbers added to story as the stock climbs, then falls, etc. etc.

Update 2: It is now just past noon on the East Coast and LinkedIn's stock stands at over $107 a share. I think it is safe to say that the WSJ was right, this is a bubble. It is also safe to say that the investor class is crazy and should be committed.