Twitter and Facebook (as well as Groupon and Zynga, which are also in the running to be the next to IPO) have both been linked with a possible float in the next couple of years. So what happens next will be closely watched by both companies. If things go well for LinkedIn, it’ll provide a useful indication of how social media sites are regarded by the markets – although LinkedIn is by no means a typical case. For a start, it actually makes proper money – partly from advertising, but also in the form of subscriptions and corporate accounts.
Still, at least it will give provide some indication of investor interest – which will make it easier for others to work out how much their shares should be worth as and when they float.
So this price upgrade is a positive sign – although some think investors may be getting a bit over-excited. To begin with, LinkedIn is likely to be valued at about 17 times annual revenues; that represents a pretty bold bet on what its future earnings will be, particularly given it’s not expected to turn a profit until at least 2012. By comparison, even Google is only valued at only six times its revenue.
And that aside, there are also concerns that it could trigger another ‘Netscape moment’. When the browser company IPOd in the early 1990s just two years after it started, it began something of a trend, with dozens of relatively young, inexperienced technology companies floated in a relatively short space of time. Is this price frothy enough to suggest the start of another dot-com bubble?