LINKEDIN IPO

So LinkedIn just began trading under LNKD. It was originally priced around $35, then moved to $45. It opened this morning above $80, and is currently pushing $90.

What is everyone's thoughts on this? Did the underwriters absolutely rob linkedin of cash by mispricing this issue?

Is this the beginning of a bubble in tech?

Wish I got my greedy hands on some shares before the open...

Comments (95)

May 19, 2011

arrrghhhh I knew I should've bought the opening stocks!! I just never thought LinkedIn would ever make that kind of jump so soon. It isn't Google. People are effing crazy these days. Linkedin? Really?

Side Job :P : AlphaThrottle Financial News Blogger, VP Financial Media

May 19, 2011

"Its a rich valuation"

GTFO. $8BN Valuation on a company that made $15MM net last year?

I can't wait to see what the rest of the this year brings for IPOs

May 19, 2011

This is absolutely wild. Though they just interviewed the CEO on blmbg tv and he said he didnt mind the money left on the table. Hes either completely bullshitting or knows this is all just wild speculation...which it is

May 19, 2011

saw this too. i was thinking about buying at open FML

May 19, 2011
oldmansacks:

saw this too. i was thinking about buying at open FML

It's not like your order would've been filled at 45...

May 19, 2011

I bought at open and I got shares at $83

May 19, 2011
nyc123:

I bought at open and I got shares at $83

Hopefully you gave it right back to them at $89

May 19, 2011
Ben Shalom Bernanke:
nyc123:

I bought at open and I got shares at $83

Hopefully you gave it right back to them at $89

Unfortunately at $87, but yeah, that was the strategy

May 19, 2011

Who underwrote LNKD?

May 19, 2011

I believe the underwriter's are MS, BAML and JPM.

May 19, 2011

What a joke. It's Pets.com all over again. 1,000x earnings? What the fuck???

If Morgan Stanley overvalued this deal any more than they already had, John Mack would be sharing a cell with DSK tonight. No, LinkedIn has no reason to be pissed.

May 19, 2011

Welp, looks like jjcannon doesn't have to worry about paying for college anymore...

May 19, 2011

It's either a joke or a bad dream. They are trading at around 1000x annualized earnings. There is no way anyone can actually validate what we are seeing right now.

May 19, 2011

"Morgan Stanley & Co. will be the lead underwriter for the IPO. It will be joined by Merrill Lynch, Allen & Company and UBS Securities."

May 19, 2011

Who's ready to short it?

May 19, 2011
txjustin:

Who's ready to short it?

Myself and the horde of class action lawyers salivating as we speak.

May 19, 2011

rumor has it GS is behind the price. They are trying to make sure the same happens for facebook...

May 20, 2011
total:

rumor has it GS is behind the price. They are trying to make sure the same happens for facebook...

conspiracy theorists...

Still I Rise

May 19, 2011

Great tweet from @The_Analyst just now:

"There are individual Chipotle locations (think UC Berkeley campus) with as much profit as LinkedIn"

May 19, 2011

Hey guys, long time lurker, first time poster...

Simple question, but have never looked at an IPO this closely... how long does it take for options contracts to become available to trade? Tried to go in through Scottrade but the options chain is unavailable...

May 19, 2011

just sold at $91

May 19, 2011

This is complete madness. $98.80!!!!!!!!!!!!!!!!

May 19, 2011

How long does it normally take before you get to short stocks after an IPO?

Basically how long before I can be short LNKD?

May 19, 2011
cheme-ib:

How long does it normally take before you get to short stocks after an IPO?

Basically how long before I can be short LNKD?

The quick answer to this question is that an IPO can be shorted upon initial trading, but it is not an easy thing to do at the start of the offering. First, you have to understand the process of IPOs and short selling.

An initial public offering (IPO) happens when a company goes from being private to being publicly traded on an exchange. The company and an underwriting firm will work together to price the offering for sale in the market and to promote the IPO to the public to make sure there's interest in the company. Generally, shares in the company are sold at a discount by the company to the underwriter; the underwriter then sells it on the market during the IPO. When an investor short sells, he or she essentially borrows a stock and repays it in the future. If you do this, you're hoping the price of the stock will fall because you want to sell high and buy low. For example, if you short sell a stock at $25 and the price of the stock falls to $20, you will make $5 per share if you purchase the stock at $20 and close out the short position.

To be able to short a stock, you usually need to borrow it from an institution such as your brokerage firm. For them to lend it to you, they need an inventory of this stock. Here's where the difficulty can arise with IPOs and short selling: an IPO usually has a small amount of shares upon initial trading, which limits the amount of shares that can be borrowed for shorting purposes. On the day of the IPO, two main parties hold inventory of the stock: the underwriters and institutional and retail investors. As determined by the Securities and Exchange Commission, which is in charge of IPO regulation in the U.S., the underwriters of the IPO are not allowed to lend out shares for short sale for 30 days. On the other hand, institutional and retail investors can lend out their shares to investors who want to short them.

However, only a limited amount of shares would probably be available on the market as the company would've just started trading publicly and the shares may not have been completely transferred. Furthermore, there might be a lack of willingness among investors to lend their shares out to be short sold.

So, while there are regulatory and practical obstacles to doing it, it is still possible to short sell shares in a company the same day the company goes public.

May 19, 2011

$103!!

May 19, 2011

$103.50!!!!!!!

May 19, 2011

$107.89

May 19, 2011

Can't wait to short the shit out of this stock.

May 19, 2011
manbearpig:

Can't wait to short the shit out of this stock.

We've had two duplicate posts at the same time

May 19, 2011

I cannot believe this thing. Up $64 on a stock that priced at $45.

Eddie - prepare to short the shit out of it

May 19, 2011

Over $110

May 19, 2011

A PM here just bought in...

If I had asked people what they wanted, they would have said faster horses - Henry Ford

May 19, 2011
happypantsmcgee:

A PM here just bought in...

Hopefully he's not a buy-and-hold type guy. lol

May 19, 2011
manbearpig:
happypantsmcgee:

A PM here just bought in...

Hopefully he's not a buy-and-hold type guy. lol

No but he might be unemployed soon...

If I had asked people what they wanted, they would have said faster horses - Henry Ford

May 19, 2011
happypantsmcgee:

A PM here just bought in...

You're kidding right?

May 19, 2011
alexpasch:
happypantsmcgee:

A PM here just bought in...

You're kidding right?

He's down a sizable amount since I posted that. Everyone is laughing at him.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

May 19, 2011

Oh my $115! WTF

May 19, 2011

$122????

May 19, 2011
kingtut:

$122????

lol, feel pretty bad for those assholes who bought at 122.

May 19, 2011

And here it comes, crashing down.

May 19, 2011

Eddie beat me to the pets.com reference.

For the young folk out there, imagine this type of ipo/valuation happening every single day....that was the tech bubble.

May 19, 2011

If the valuation holds, I'll sell a call spread and use the money to buy way OTM puts once options become available. I doubt it holds though.

May 19, 2011

hahhaha this is unbelievable! gimme PUTS! otm will pay well in the next 6-12mos

anyone know when they will be intoduced?

May 19, 2011

Hold up, I have quick question. Couldn't institutional investors that bought it at $45 yesterday and sold it today for $90 today, short the stock next week ?

May 19, 2011
Peter_27:

Hold up, I have quick question. Couldn't institutional investors that bought it at $45 yesterday and sold it today for $90 today, short the stock next week ?

In theory yes, though your broker will hate you for it and good luck getting future IPOs from them.

May 19, 2011

called it. pump + dump on the IPO, then avoid like the plague.

short it NOW and watch it BURN BABY BURN

May 19, 2011

internet bubble 2 here we come.

May 19, 2011

The $45 stock price was inflated. $100+ is just madness. If LinkedIn got this much activity on day 1...I wonder what will happen w/ Facebook.

May 19, 2011
gobigorgohome:

The $45 stock price was inflated. $100+ is just madness. If LinkedIn got this much activity on day 1...I wonder what will happen w/ Facebook.

Facebook will double, no matter what the price is. I guarantee it.

May 19, 2011
alexpasch:
gobigorgohome:

The $45 stock price was inflated. $100+ is just madness. If LinkedIn got this much activity on day 1...I wonder what will happen w/ Facebook.

Facebook will double, no matter what the price is. I guarantee it.

Yep, I'm opening a brokerage account for the sole purpose of trading up and then shorting the shit out of it

May 19, 2011

I am officially scared.

May 19, 2011

What broker site are you using? I didn't think you could short yet

It is what it is

May 19, 2011

Social media bubble. All these sites are already past their prime. Now, they want to dump these shit stocks on the unsuspecting public.

May 19, 2011

I'm using ThinkorSwim. the shorting function is available to me on their interface....i haven't clicked it yet but nowhere does it say i'm not allowed to short...

May 19, 2011

you cant currently short it.

May 19, 2011

my friend at JPM called during lunch break and said his trading desk shorted it...

May 19, 2011

.

May 19, 2011
lookatmycock:

my friend at JPM called during lunch break and said his trading desk shorted it...

Couldn't have. JPM is an underwriter.

May 19, 2011
Edmundo Braverman:
lookatmycock:

my friend at JPM called during lunch break and said his trading desk shorted it...

Couldn't have. JPM is an underwriter.

that's what i thought!!!!!!!!
but not even a small subsidiary/proprietary trading division of JPM's could do it?
bleh. the kid had quite a mouth over the years.

May 19, 2011

maybe they did* but unless they you are naked you can't*

May 19, 2011

When will shorting be available?

May 19, 2011

after the shares settle.

May 19, 2011

ok all kidding aside...how can this truly be possible? I just don't understand it even in the most optimistic light

May 19, 2011

To those asking about LNKD options: May 27th; unclear whether we'll see weeklys right away or not. Probably just monthlys at first.

As for shorting, been posted above, but basically the PDs need to get some inventory first. "Special" clients get first dibs within 2 days or so, retail i'd presume 3 days or shortly thereafter. So look for it by Tuesday with whichever broker you use.

May 19, 2011

We had clients call wanting to short and we couldn't

This is ridiculous

May 19, 2011

Still nothing compared to first day trading gains on internet stocks in 99
http://blogs.forbes.com/ericsavitz/2011/05/19/link...

May 20, 2011

$122/share

WHAT THE FUCK?

May 20, 2011

In case you were wondering, the record first-day of trading pop is still held by TheGlobe.com, an early social networking company which came public in 1997 at $9 a share, and traded as high as $97 on the first day, before closing at $63.50. By 2001, the stock was under 10 cents. While TheGlobe's operations are long gone, the company actually still exists as a corporate shell - the company's Web site provides some of the history - and the stock even trades occasionally. Last trade: one cent.

May 20, 2011

I think it's incredible how ignorant some investors are of the actual fundamentals behind this company (or any online company, for that matter). It's based purely on 'potential' and no hard facts.

May 20, 2011

This is nuts.

Still I Rise

May 20, 2011

Watch it hits $200 today.

May 20, 2011

Up 8% today

May 20, 2011

OK, this makes no sense to me.

I want to look at the S-1 later, but haven't had the chance.

I quick glance in my Scottrade "research" tool show that EPS is $0.0386 and the stock is over $100.
Also, Cash (from Operations) of $50M and almost a $10B Market cap.

WTF? Is there any way that this is right (especially that EPS #)?

twitter: @CorpFin_Guy

May 20, 2011

s1 is all historical performance. Investors are pricing off of proforma performance and pricing in growth. I would ignore the multiple of s1 earnings. Also this site really has yet to monetize, another reason why historical earnings are misleading.

Still, that being said this is a case of jumping on the bandwagon vs fundemental. Fundementals will always win in the long run.

May 20, 2011
BCbanker:

s1 is all historical performance. Investors are pricing off of proforma performance and pricing in growth. I would ignore the multiple of s1 earnings. Also this site really has yet to monetize, another reason why historical earnings are misleading.

Still, that being said this is a case of jumping on the bandwagon vs fundemental. Fundementals will always win in the long run.

100% agree. I wanted to look at the S-1 just to confirm the eps # (and read disclosures). Believe me, I wasn't looking for a P/E of 20 or really anything rational, but that is absurd.

I got a chance to read their risks listed on the S-1 - this valuation is totally ridiculous. They don't expect to be profitable in 2011 based on GAAP measures and they call out multiple times that a vast majority of their activity is from a small # of users (paraphrasing).

I can't even imagine the frenzy that will come with the Facebook IPO.....

twitter: @CorpFin_Guy

May 20, 2011

Who is buying though? There guys in my office who would'nt know what short selling is who are laughing at the price?

I find it baffling.

May 20, 2011

Think about the long run potential...you have to think about how much linkedin will be worth 10 years from now. Facebook right now is growing its revenue by 100%-200% per year, and Facebook went from 100 million -> 500 million users in less than two years.

Ten years from now Linkedin could easily have 500M-1 Billion members, and just $5-$10 annual profit per user would give them between 2.5 billion and 10 billion in annual earnings. That's a 10 year forward PE between 4 and 1. Not rich at all.

Also think scalability. Margins will get much wider as revenue grows, since costs are not proportional to the user base. Look at facebook, which only has twice as many employees.

May 21, 2011
absinthe:

Think about the long run potential...you have to think about how much linkedin will be worth 10 years from now. Facebook right now is growing its revenue by 100%-200% per year, and Facebook went from 100 million -> 500 million users in less than two years.

Ten years from now Linkedin could easily have 500M-1 Billion members, and just $5-$10 annual profit per user would give them between 2.5 billion and 10 billion in annual earnings. That's a 10 year forward PE between 4 and 1. Not rich at all.

Also think scalability. Margins will get much wider as revenue grows, since costs are not proportional to the user base. Look at facebook, which only has twice as many employees.

The potential here is very blind, however. Facebook grew so fast because they changed their target audience and their long-term strategy that allowed them to grow. FB was originally only made for college students with a university email address for the sole purpose of networking with other college students and little else. Now, there are functions similar to Groupon, Twitter, Craigslist, games, it's own extensive line of apps, etc within the site. Plus, they're trying to create their own FB phone and a platform/OS. It's taking the Google path to dominance. Facebook just created slightly more for its professional section. It won't provide what LinkedIn or monster.com and other job search sites do, since that's not it's purpose. But it will be ramped up some more in the near future. FB's growth in users has prob reached close to its peak. Most of its new business will come from either more innovative ideas, if China allows it, or with the growth/change in new population.

LinkedIn already has a very limited audience. The site is great and all for what it's meant to do, but going public? That's like combining ConnectU and monster.com and making that go public. As alot of folks said, the advertising revenue model is not a great one these days. LNKD makes most of its other revenue from corporations/businesses using its services and analytics. I bet hardly any non-employers actually pay for the service. I think it's $50/month for a premium account, which isn't much difference from its basic account.

You can't really even compare LNKD to other SaaS products, like Salesforce.com, which actually provides a real product and service that is becoming very critical to small and large businesses along with the growth of cloud computing. Someone may have mentioned Netflix, which once again provides a real, substantial product that actually competes well with other things like Blockbuster or even Comcast and other cable services. Unless LNKD does something very drastic to change how integrated and critical it is for our way of living or doing business (maybe some kind of service where all employers/HR depts stop creating their own job posting and career sites and do it through LNKD), then it won't advance any farther than where it is now.

May 27, 2011
absinthe:

Think about the long run potential...you have to think about how much linkedin will be worth 10 years from now. Facebook right now is growing its revenue by 100%-200% per year, and Facebook went from 100 million -> 500 million users in less than two years.

Ten years from now Linkedin could easily have 500M-1 Billion members, and just $5-$10 annual profit per user would give them between 2.5 billion and 10 billion in annual earnings. That's a 10 year forward PE between 4 and 1. Not rich at all.

Also think scalability. Margins will get much wider as revenue grows, since costs are not proportional to the user base. Look at facebook, which only has twice as many employees.

The industry is so uncertain, dont even dare to predict for 10 months. Why dont you talk about myspace from 80 million users to couple of million 'active' users now in the last few years. Why dont you talk about yahoo or hotmail.com or altavista.

Imagine a world without linkedin for 100 days. Its possible. It isn't the same when you look at google and its services. (maps, gmail, android, talk, search, news) or microsoft windows/office or apple.

There are millions of kids, housewives, small and medium businessmen, self employed people, students who dont need the professional networking. Ask yourself, Why does a housewife need to login to linkedin and look for jobs when she isn't interested. This isn't the same for facebook. Not every one is working on wallstreet and neeeding a recommendation from his boss posted on linkedin. So numbers you posted are junk.

Sometimes very smart people forget that a large number multiplied by zero is still a zero.

May 20, 2011

Wait a minute, a lot can happen in 10 yrs.

I don't see LinkedIn maintaining growth over a 10 yr time horizon because so much can happen in the "web 2.0" space in 10 yrs; the industry moves at warp speed. Facebook, maybe. But not LinkedIn.

man made the money, money never made the man

May 20, 2011

Get serious. LinkedIn doesn't exist 10 years from now.

May 21, 2011

http://www.nytimes.com/2011/05/21/opinion/21nocera...
comment section is hilarious. Good quote "Greed, the hunger for power, and vanity are unhealthy for children and other living things"

In all seriousness though, the bankers did underestimate excitement, but I have serious doubts that its a giant scam.

May 21, 2011
MI23:

http://www.nytimes.com/2011/05/21/opinion/21nocera...
comment section is hilarious. Good quote "Greed, the hunger for power, and vanity are unhealthy for children and other living things"

In all seriousness though, the bankers did underestimate excitement, but I have serious doubts that its a giant scam.

Nice post! Personally I'VE HAD IT with the NYTimes crowd that seems to view two fundamental human traits as criminal:
1. People make mistakes. Are there crooks? Yes. More often though, someone screwed up.
2. Competition: Although there is a cartel element to banking, at the end of the day they are competing.

They really need to get over it: Life's not fair.

May 21, 2011

What was google making per year in profit when it IPOed?

May 21, 2011

Update : they made $100m in net income in 2003

May 23, 2011
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May 23, 2011
May 23, 2011