LinkedIn sparks tech bubble fear
SOCIAL network website LinkedIn last night hiked the projected price of its stock market float, sparking fears of a tech bubble amongst observers.
The business-orientated competitor to Facebook raised the range of its initial public offering by $10 from $32-$35 per share to $42-$45 per share.
It now expects to raise as much as $406m from the 7.84m shares it is selling, and it would be valued at up to $4.25bn. The price puts LinkedIn almost 258 times above its $15.4m earnings for last year, raising analyst concerns over a possible repeat of the dot.com bubble.
LinkedIn also revealed yesterday that it did not expect to be profitable this year.
“The revenues of these firms aren’t anywhere like where they should be for the valuations being set,” said Rob Enderle, principal analyst at Enderle Group. “There is a feeding frenzy on social media and this feeding frenzy can create a pretty good size bubble.”
However, the hike in price for LinkedIn indicates considerable appetite amongst investors for social media companies. Many firms in the space, including Facebook and Twitter, are expected to go public in the coming years.
“Those firms will start attracting a lot of investors but at some point, if they can’t bring revenues in line with valuations, then the market will correct and folk will be stranded,” Enderle added.