20 May 2011 - 7:22pm | posted by

Does LinkedIn success mean $100 billion for Facebook? Don't count on it

Does LinkedIn success mean  $100 billion for Facebook? Don't count on it Does LinkedIn success mean $100 billion for Facebook? Don't count on

On Day 2 of the LinkedIn gold rush, many people doubted if it could hang on the $10 billion valuation

On that basis Facebook , expected to go for an IPO next year, would be valued at about $107.6 billion .

The caution over the 2011 goldrush however was visible everywhere. In AdWeek, CNBC’s Mark Haines said, “Everybody is toeing around calling this a bubble. I’m going with a bubble. It’s a bubble.”

Former U.S. Treasury Secretary Lawrence Summers said at a conference in Shanghai, “Who could have imagined that the concern with respect to any American financial asset, just two years after the crisis, would be a bubble?”

Bloomberg Business News was more positive,"The gains bode well for Internet companies that have put off going public while honing efforts to make money, and they may brighten prospects for the venture capital industry."

Paul Bard, director of research at Renaissance Capital said on TV. “You are going to see more companies going public to capitalise on this wave of interest.”

Dan Veru is chief investment officer at Palisade Capital Management, which actually bought LinkedIn stock in the IPO. He said LinkedIn may not be able to sustain the market value it has now reached.

"At $100 a share, we would not be buyers,” he said. “It far exceeded our expectations for what it would do in the first day of trading. It would be amazing to me, with the revenue base it has, if it maintains a $10 billion market cap.”

Adweek also pointed out that over 90 percent of LinkedIn’s shares hadn’t been issued yet.

“Using the oldest IPO trick in the book, the underwriters only issued 7.84 million shares, thereby creating an artificial shortage,” wrote The New Yorker’s John Cassidy. “Even at $90 each, the value of LinkedIn’s publicly issued stock is just $706 million.”

LinkedIn’s executives seem to know that their company may be overvalued. In the IPO prospectus, they wrote, “We expect our revenue growth rate to decline, and, as our costs increase, we may not be able to generate sufficient revenue to sustain our profitability over the long term.”

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