Linked In, Cashed Out

A number of people have asked me what I think the story with Linked In's IPO is - lest we forget (Wired):

LinkedIn went public Thursday and, as expected, soared in its debut. But the social network for professionals outdid even the wildest expectations in what has become a red-hot IPO environment, ending the session up nearly 110% above its opening price of $45.

LinkedIn never traded below $80, and closed out its first day as a public company at $94.25 — providing a windfall for the Wall Street insiders who participated in the offering, as well as the private investors who bought shares on secondary markets.

The minute I read a few days ago that the shares being offered were (i) ordinary and dilutable and (ii) were a tiny volume of the total ownership, it was predictable that they would pop at far higher than the issue price (any pundit who bleats about how much Linked In was screwed by is being naive*, and as Paul Kedrosky notes should probably be ignored henceforth)

The valuation at c $7.5bn on c $250m revenues (30x) is of course is absurd by any "normal" valuationthough it is dwarfed by Facebook's nominal 70x. But of course these are based on small traded share bases.

So far, so dotcom.

The one difference between Dotcom 2.0 an 1.0 isthegood companies actually do make some money. The company actually does have revenue - making $250m pa after onlya few years is pretty impressive. Also, as Sarah Lacy notes, Reid Hoffman is actually a social media entrepreneur who one can look up to

To my mind though Linked In is not the Big IPO of our Bubblewatch - its the "John the Baptist" IPO, it is pointing the way for the Big IPO of this second coming of the Dotcom Mania - Facebook.

*Insitutional investors ain't dumb - if they can be scraped on the shares, they will want to see a big jump so they can dump.