

LNKD IPO opens huge at $83 - j_b_f
http://www.google.com/finance?q=NYSE%3ALNKD

======
blantonl
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.

A valuation of 6.5 billion dollars on $15 million net income. Let that sink
in.

~~~
dman
Might be a nice time to short, that is if there is someone willing to be on
the other side of that trade.

~~~
monochromatic
There always is.

~~~
thematt
Not always. There are some companies that don't have enough liquidity to
effectively make that trade or have no investors willing to lend the shares.
Not to mention shorting (or options) aren't even allowed yet on this
particular stock.

~~~
rrrazdan
But in this case there is almost a certainty that people would accept your
short. I would.

~~~
brosephius
except that's not how shorting stock works. it's not a person-to-person deal.

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stevenj
Two quotes:

"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]

-Warren Buffett

"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]

-Charlie Munger

\- - -

[1]
[http://money.cnn.com/magazines/fortune/fortune_archive/1999/...](http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/)

[2] <http://ycombinator.com/munger.html>

~~~
RockyMcNuts
Those are really important and good points...but they're also why the two
amigos don't invest in tech

\- hard to predict if LinkedIn will be around and in what form in 20 or 30
years

\- Munger's statement is true if the company can keep reinvesting capital at
that ROE over a long time period. In fact, beyond an inflection point, a
company like Microsoft or LinkedIn can become a natural monopoly and increase
revenues and profits a lot with relatively little capital - there are actually
INCREASING returns to scale. Which is what LNKD investors are apparently
betting on.

Tech investing is more about the Next Big Thing, who is the next Microsoft or
Google, and less about is there some moat that lets them earn 18% on capital
and keep reinvesting the capital over a long period, which is where Buffett is
a master.

------
sampsonjs
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."

[http://www.newyorker.com/online/blogs/johncassidy/2011/05/li...](http://www.newyorker.com/online/blogs/johncassidy/2011/05/linkedin-
ipo-party-like-its-1999.html)

------
dstein
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.

~~~
brosephius
there's a lockup period, nobody is selling their pre-IPO shares now.

~~~
dstein
That would prevent insiders and common shareholders from selling their shares,
but it would in no way prevent an investment bank from unloading their shares
through some sort of intermediary.

~~~
brosephius
you mean the underwriters of the IPO are not subject to a lockup period? that
seems unusual, but I'd believe it I guess.

~~~
dstein
They probably are, but what I mean is they could use some 3rd party to short
their own shares. We're talking about people that can rob the US government of
a trillion dollars in plain sight.

~~~
brosephius
what 3rd party? banks usually are the third party in these sorts of
transactions.

~~~
dstein
Through an under the table deal with any hedge fund, or any number of other
means, an investment bank that owns LinkedIn shares could quite easily insure
their profits. That is exactly what these businesses do.

~~~
radicaldreamer
Most hedge funds use a bank as their primary broker.

------
dodo53
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?

Any startup survivors from the last one wish they'd done things differently?

~~~
blakeweb
It's mainly the investors that lose out from a bubble bursting--one way to
look at it is that a bubble is just a good time to get a high valuation from a
company's perspective. By calling it a bubble, you're saying you think there's
more money out there looking for startups to invest in than startups whose
prospects can support that valuation. That's a good time to get OPM (other
people's money) and spend it on whatever your dream idea is, if you think
you've got a shot at making it work.

There are of course counterarguments: \- Other startups are getting too much
money at the same time you are, and probably spending it in irrational ways
that may make it harder for you to be profitable, such as overpaying on
advertising and hiring. The same argument can support the idea that the best
time to start a startup is during a recession, when the big companies aren't
investing enough money in growth. \- When the bubble bursts, there will be far
more startups looking for money than money looking to be invested, so you're
more likely to have to throw in the towel after bursting.

On the balance, I agree with the advice of most experienced entrepreneurs I've
heard--err on the side of worrying more about yourself, your idea, and how
you'll execute, and less about the economic environment at the time.

------
nikcub
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

edit: wrong multiple

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yoseph
Round again we go...

It's so disappointing to watch...

But it's not a bubble if we're able to tell it's a bubble, right?

~~~
bemmu
Latest NPR Planet Money podcast episode was about bubbles, they interviewed a
university professor that was running experiments on his students. They had a
fake stock market with only one stock on it that would have a random dividend
of either $0 or $2, so $1 on average. Students were given money to invest in
the stock market. Running this experiment apparently over multiple courses,
even in this small market there would be bubbles.

He brought up one such bubble in a lecture in front of the students,
explaining to them that their investment made no sense considering the average
dividend. He expected this explanation to crush the bubble since now everyone
was aware of it. What happened instead was students going "wow, a bubble, I
must get in on it!" and the stock just going even higher.

~~~
smokeyj
People don't treat monopoly money like real money. Stunning. Next the
professor should see how risk adverse these students are with their own
tuition dollars. Suddenly these kids aren't the big rollers they were with
imaginary risk. Quit looking at numbers, follow the risk. Numbers are relative
to risk. Consider the influence of monetary policy on risk. Does a cheaper
dollar make a frugal investor? Hardly.

~~~
julianz
Or you could listen to the podcast and find out that it was real money, but
why let facts get in the way?

~~~
seunosewa
Link?

------
3am
As usual, Paul Kedrosky has some of the best observations:

[http://www.bloomberg.com/blogs/paul-kedrosky/2011/05/some-
li...](http://www.bloomberg.com/blogs/paul-kedrosky/2011/05/some-linkedin-
lessons-implications.html)

------
chopsueyar
Listed at $45 initially.

There will be less Aeron chairs this time.

~~~
georgemcbay
The Mirra chair is more comfortable. And cheaper.

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alex1
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?

~~~
Aloisius
Morgan Stanley, Merril Lynch, BofA and JPMorgan I believe.

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pbreit
Everyone here should be ecstatic about this development. Perhaps the most
talented, savvy and generous angel investors now has $1 billion.

~~~
UncleOxidant
On paper.

~~~
Apocryphon
Which money is made of.

~~~
yuvadam
touché

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dataminer
Can someone explain why stock opened at $83 when it was offered for $45.

~~~
brosephius
there was higher demand for the shares than anticipated?

~~~
dataminer
The chart at google finance displays the price was $83 on 9:30 when the volume
was 0. I can understand the price rising due to higher demand but not the
discrepancy in google finance chart when the volume was 0.

~~~
brosephius
that's where it opened. the $45 price is where stock was bought before it
started trading publicly; once the stock opened on the nyse it first changed
hands at $83.

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iamelgringo
There's going to be a lot more angels running around town the next few years
with money to invest.

Things are going to get very, very interesting.

Next up, Zynga, Twitter, Facebook, Yelp, Pandora...

~~~
orijing
Pandora's already public.

~~~
iamelgringo
_LinkedIn’s IPO is viewed by many as a barometer of the public market’s
appetite for Internet and social media companies, with the likes of Facebook,
Groupon, Pandora and Kayak expected to IPO within the next year. Certainly,
today’s huge pop in LinkedIn shares sends a signal that the market is once
again hungry (if not starving) for tech._

ref:
[http://socialmediaobserver.wordpress.com/2011/05/20/linkedin...](http://socialmediaobserver.wordpress.com/2011/05/20/linkedin-
shares-soar-in-ipo/)

Also:

 _Morgan Stanley, BofA Merrill Lynch, J.P. Morgan may divvy up $21 million to
$24 million -- On the horizon: Facebook, Groupon, Pandora_

[http://www.advfn.com/nyse/StockNews.asp?stocknews=BAC&ar...](http://www.advfn.com/nyse/StockNews.asp?stocknews=BAC&article=47759182&headline=investment-
banks-profit-from-social-media-bonanza)

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johnohara
_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._

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.

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random42
It poses a question I suppose. Does it makes sense for FB to go public ASAP?
Wall street obviously seems bullish on social networking websites.

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zach
Great news for related sites too -- I'm thinking of Quora and Namesake.

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.

Namesake has been getting traction and executing well -- their valuation has
definitely just gone up as well.

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emilhajric
WOW it's now at 108.47 +63.47 (UP BY 141.04%)

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lurker20
Interesting that now, 4 days later, after a brief runup to $115, LNKD is at
~$86, very close to the opening sale.

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nikcub
called it: <http://news.ycombinator.com/item?id=2563481>

should have put a lot of money on that. I think it will hit $18-20B market cap
in no time

~~~
mhp
You couldn't have actually put a lot of money on it (unless you bet one of
your friends, or in the unlikely case that you or your family member works for
LinkedIn). The trick with IPOs is that even if you had the shares earlier, you
couldn't sell them today because of the six month lockup period. The only way
for you to get in would be right now at ~$80.

~~~
nikcub
that is true if you want to directly purchase shares, but there were market
makers and other outlets offering CFD's and derivatives at just above the list
price.

judging by the volume (9M traded so far, which is more than what was listed)
there seems to be a lot of that going on

~~~
brosephius
>there were market makers and other outlets offering CFD's and derivatives at
just above the list price

do you have an references for that? were these offerings available to small
retail investors?

~~~
nikcub
I have an accounts with a number of these guys, but I specifically found LNKD
at CMC and ICM last night

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e13
linkedin reminds me of Classmates.com

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abofh
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.

~~~
davidhperry
You're correct, according to Henry Blodget at Silicon Alley Insider. The CEO
sold some stock last night at $45, which could have been sold for $90 this
morning. <http://www.businessinsider.com/linked-in-ipo-2011-5-b>

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gojomo
It's August 1995 again!

<http://en.wikipedia.org/wiki/Netscape#Early_years>

~~~
gojomo
Those who downvote the lessons of history are doomed to repeat them.

~~~
kmfrk
And what lessons are they?

People should educate everyone on why we have a bubble with _arguments_
instead of shouting "bubble! bubble!", every time people discuss the finances
of start-ups.

Hitler! 1984! Communism! Statements aren't arguments.

~~~
gojomo
I'm not shouting 'bubble'. 1995 was not a bubble. Even given their record-
breaking IPO pop, Netscape may have been underhyped at that time – given all
that was to come, and despite how things ultimately turned out for 'Mosaic
Communications Corporation'.

So one potential lesson from parallels to the NSCP 1995 IPO is that there may
be 4-5 exciting years ahead.

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hvass
Somebody please tell me you'll be shorting it.

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tristanperry
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.

~~~
kmfrk
You should have gone for the long comment.

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ataggart
I'm looking forward to buying some put options.

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adamtmca
Winner's Curse.

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suking
Almost $100/user, not even including active users... that is insanity.

~~~
ericwaller
The current valuation is ~$8.5 billion, wikipedia puts them at ~100 million
users. That works out to be ~$85/user.

~~~
mikeryan
The current valuation has jumped about 15-25% (from 88 to 110 per share) in
the 10 minutes I've been watching it.

right now's not the time to pick nits on their valuation this whole thing is
going to be completely out of whack for a while.

~~~
ericwaller
The comment I was replying to originally had "almost $1k/user".

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iphoneedbot
OK, This is the first tangible evidence that we are indeed /now/ in a Bubble!

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run4yourlives
This is nothing more than a legalized pyramid scheme.

The valuation of LinkedIn has nothing whatsoever to do with the business, its
performance, future potential or current assets.

It has everything to do with demand for its stock being high.

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).

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 _will_ come crashing down.
LinkedIn is NOT a $4 Billion company. It's just a matter of when.

~~~
jeffreymcmanus
News flash: every company's stock value is based on demand for its stock. This
is how the price for everything is set.

Maybe when we discover true stock-picking clairvoyance this will change and
every stock's price will be based on its true future potential, but I wouldn't
hold my breath waiting for this to happen anytime soon.

~~~
run4yourlives
The demand however is based on "expert analysis" that suggests that LinkedIn
is worth 4 billion dollars.

I don't have an issue with demand setting the price; I have an issue with that
demand being justified by linking it back to the potential performance of the
company in such a way that anyone with half a brain can seen is bordering on
the ludicrous.

If the problem was limited to investors that were prepared to take risks and
pay for their own loses that would be one thing. The issue I have is that when
these things do come crashing down, it seems to hurt everyone but wall street.

~~~
nikcub
You know what is ludicrous? That LinkedIn is on for $400M this year and has
doubled its revenue each of the past 3 years

That is ludicrous

~~~
run4yourlives
It's also unsustainable. LinkedIn will never be worth however many billions of
dollars it's valued at right now without a healthy does of speculation and
fad-type demand.

They only made $15 MM last year. That's a perfectly acceptable profit and a
well run company, but it is not billions of dollars.

