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by Derek Loosvelt | May 20, 2011


Yesterday, after LinkedIn went public at $45/share, its share price more than doubled. Today, the social media firm's share price is continuing to fly: although it's now hovering around $99, it earlier rose by 14 percent to over $103. What this strong demand for LinkedIn's shares means is that a host of people, companies, and industries are cashing in, and will continue to stuff their pockets with social media-related cash during the foreseeable future.

linkedin ceoOf course, social media company founders (like the one pictured at left), chief executives, and shareholders (of LinkedIn and other companies such as Groupon and Facebook that will be going public soon) will be benefitting from this high demand and high valuation that investors are placing on social media firms. As Bloomberg points out, "LinkedIn's market value at its peak price today is $10.1 billion, or about 26.9 times 2011 revenue ... Facebook Inc., the world's largest social network, would be valued at about $107.6 billion using the same multiple." (Imagine what a Facebook IPO would do to Mark Zuckerberg's net worth; perhaps it won't be long before cool is no longer a billion dollars but a trillion.)

Also benefitting hand$omely will be the venture capital firms that have a piece of these social media companies. And VC firms with Internet-based companies (but not neccessarly social media companies) in their portfolios will also profit.

LinkedIn's Death Valley-hot IPO has signaled that the market is again ripe for Internet-based companies to go public, so VC firms that have been waiting for the day for the market to turn around will likely not have to wait any longer (and as an indication that VC firms have perhaps already begun to take their Web-based portfolio firms public, "venture-backed companies raised $1.38 billion in IPOs in the first quarter, a 47 percent increase from a year earlier.")

And then we have the investment banks. With an increase in firms wanting to access the public markets, and the public markets receiving these offerings with open arms, the financial institutions that underwrite public offerings, skimming a few percentage points off of each IPO or secondary they price, will certainly be cashing in as well.

But just how long the public markets will embrace social media and other Web-based companies remains to be seen. It also remains to be seen if LinkedIn and other companies will be able to maintain such lofty valuations.

(Bloomberg: LinkedIn Surges on Second Day After IPO)

(Related: LinkedIn, Groupon and Facebook: the Great American Social Media IPOs)


Filed Under: Finance

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