Last Thursday LinkedIn Corp’s shares more than doubled in their first day of trading, setting the stage for debuts from other Internet companies such as Facebook Inc. and Groupon Inc.
The outsize demand for the stock of an Internet company that is growing rapidly but had a profit of $15.4 million last year is the latest sign of the surge—some say bubble—in Web valuations even as the broader U.S. economy struggles to rebound from the recession. Shares of LinkedIn, which operates a professional-networking site, opened at $83 on the New York Stock Exchange, up 84% from its initial public offering price of $45. By the market’s 4 p.m. close, the stock had soared 109% to $94.25. At the end of the day, LinkedIn was worth $8.9 billion. Now – whatever way that we care to look at this – that is a lot of money to pay for a company that has only made $15 million so far. It is placing a PE value of 600…in other words – if LinkedIn does not improve its earning at an almost exponential rate then it will take investors 600 years to get their investment back. Read more