As we wrote in a previous post, more social media stocks are going public this year. LinkedIn has beat Facebook, Skype, Zynga, Twitter and Groupon to the metaphorical punch. The price per share at closing time May 19th had settled on $94.25 more then doubling the IPO of $45. That means that the market value represents almost 37 times last years sales for LinkedIn or $8.9 billion. Lets compare this to Google Inc’s shares that are valued at just under six times sales for 2010.
Warning signs have been seen with other stocks this year according to The New York Times. Renren, the Chinese version of Facebook went public in early May at $14 a share and quickly shot up. The stock now sells for below the original opening price. All this poses difficulties for underwriters to accurately price a social media stock ahead of time. Some suspect that people are so hungry to buy Facebook that buying LinkedIn shares appeared to be a good second place option.
If the first day of LinkedIn’s IPO offers any insight on how the next social media stocks will rise; then the key may be buy early and sell at the end of opening day. For those that did this saw their money double in 9 short hours. At the same time offerings were only 10% of the companies total shares and considered very hard to get.
Ahh, sit back and watch the bubble expand.