LinkedIn IPO: A Sign of the Apocalypse?

05/19/2011 3:02 pm EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

If the world doesn't end Saturday, as some expect, it could take eons for the stock to grow into its valuation...but maybe only months for Facebook to offer a piece of itself for public adulation, writes senior editor Igor Greenwald.

There is another apocalypse in the offing Saturday, and if the LinkedIn (LNKD) IPO is one more sign that the end is nigh, at least the sinners who lucked into an allocation have already experienced rapture.

The professional networking hub had hoped to sell not quite 8 million shares at $32 to $35, ended up pricing at $45 and then the stock promptly spiked as high as $120 before settling down a bit to $105.

At that price, LinkedIn is being valued at close to $10 billion-not bad for a company that turned its first profit last year, netting all of $15 million.

If you squint at LinkedIn's 100 million users just the right way, it's possible to see another Facebook (which has a head count six times larger, and is exponentially more popular), only with more runway.

I'm no expert on social networking, seeing as my own LinkedIn profile is three years out of date and freighted with unrequited friend requests (or whatever it is LinkedIn calls them). I'm just not much of a networker.

But even I can see that LinkedIn is applying the efficiency multipliers of human networks to professional pursuits, which is where real money is made.

Facebook delivers viral videos and friends' photos. LinkedIn has the potential to provide jobs, employees, and career-nurturing networks. It might be easier, in the long run, to monetize that.

In other words, LinkedIn is for those who don't want to end up job hunting on, which may be one reason it now has more than five times the market cap of Monster Worldwide (MWW), despite the fact that Monster earned a lot more money in the last year. Of course, Monster doesn't have LinkedIn's 100% annual revenue growth, nor its social (multiple) multiplying effect.

And on a revenue-multiple basis (cue scary music) LinkedIn still has some ways to go, points out, to match Renren's (RENN) 70 times sales. The so-called "Facebook of China" needed LinkedIn's help today to get back above its IPO price, and perhaps Facebook will return the favor for LinkedIn when the time comes.

And with this much speculative demand, you can bet that the time is coming sooner rather than later, for Facebook and Twitter and whoever else hasn't cashed in yet. Until they reap their billions, it's silly to speculate about market tops, just as it's silly to suggest that commodity producers selling at single-digit earnings multiples are somehow in the throes of a speculative mania.

Who's paying through the nose for LinkedIn today? I know all the wise guys on CNBC would like to think it's the day traders they sneer at. (Perhaps no channel in history has so reviled its primary audience.)

In fact, LinkedIn may be surfing a wave of cash that mostly sat out the bull market. Money that's been moldering in big money-market accounts for two years may not re-enter the risk trade at its value end. It needs lots of momentum to catch up.

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