LinkedIn shares double after float, market cap reaches $US8.9 billion

The float of corporate social network LinkedIn has exceeded all expectations, with shares more than doubling after its first day on the stock market to $US94 and boosting its market cap to $US8.9 billion, helping co-founder Reid Hoffman achieve billionaire status.

The success of the decade-old website’s float is also expected to mark the beginning of a new wave of IPOs for tech start-ups and social networks – prompting some analysts to question whether the much-debated speculative bubble is on the verge of bursting.

“We knew this was going to be a super-hot IPO and gives us further evidence of the enormous appetite for this wave of next-generation internet companies,” director of research at Renaissance Capital LLC Paul Bard told Bloomberg overnight. “You are going to see more companies go public that will try to capitalise on this wave of interest.”

Some analysts are also concerned LinkedIn’s relatively small number of users, minimal revenue and projections for particularly small profits should keep some investors at bay.

Nevertheless, the listing is definitely the most successful in the tech world since Google’s run on the stock market back in 2004.

LinkedIn listed for a float back in January, but speculation rose about just how exactly the company would perform – it originally listed shares at between $US32-35, judged to be at the high end for a site with just over $US240 million in revenue.

But just days afterwards, worries grew even further as LinkedIn upped the share price to $US40, and then to $US45. But the move has paid off, with shares having hit $US121 during the day’s trading and closing at $US106.

The listing has raised the company about $US400 million, and given chief executive Hoffman, with his 19 million shares, a fortune of around $US2 billion.

Some investment companies including Bain Capital, Goldman Sachs and McGraw-Hill sold off some three million shares, with LinkedIn itself selling off 4.8 million. Some other investment companies, Sequoia Capital – the first to invest back in 2003 – and Greylock Partners did not participate.

But Hoffman isn’t the only LinkedIn executive to come out on top – chief executive Jeff Weiner came out with $US10 million, and chief financial officer Steve Sardollo has a stake worth around $US97 million.

No doubt other social networks and online companies, including Facebook, Twitter and Groupon, are closely watching the success of LinkedIn’s debut. Facebook is expected to float in 2012, and with a recent valuation of $US50 billion it would be eager to capitalise on the beginning of a new wave of interest in tech.

Telsyte research manager Foad Fadaghi says it is this mentality – to capitalise at the start of a new season of interest – that has led to LinkedIn’s success.

“I think it’s a high valuation but it’s not out of the ordinary if you take into consideration what’s happening with these other companies such as Facebook and Google.”

“This is great timing on the part of LinkedIn investors and directors. They realise if there is going to be bubble-like behaviour in the market it’s better to be upfront so you make the most of it. They’re more likely to survive.”