LinkedIn shares plunge after strong IPO
The company's stock price sank by as much 10 percent in early trading before rebounding slightly. As of early afternoon, LinkedIn shares were down $7.74, or 8.3 percent, to $85.35. It could be just the start of wild rollercoaster ride that could last for several months.
The ups and downs are likely to be driven by a debate over how much LinkedIn is really worth after rabid investor demand caused its shares to more than double in their stock market debut last week. The rapid run-up left LinkedIn with a market value of about $9 billion, or about 18 times its projected revenue of about $500 million this year -- a far higher multiple than far more profitable and better-established Internet companies. For instance, Internet search leader Google Inc. trades at about five times its projected revenue this year.
LinkedIn appealed to Wall Street because its IPO provided the biggest opportunity so far to invest in the online networking craze that is consuming a bigger chunk of people's time, a trend that in turn is attracting more advertising.
Although not as popular as social networking leader Facebook, LinkedIn has built an audience of more than 102 million members who use its website as way to connect with other people that might advance their professional careers. Other companies and job headhunters also scour LinkedIn for talented employees. Through a combination of fees and Internet ads, LinkedIn earned $3.4 million on revenue of $243 million. Its revenue is on pace to more than double this year as another million people set up a LinkedIn page very week.
But LinkedIn still hasn't figured out how to keep many of its members coming back to the website after they have posted their resumes. About one-fourth of LinkedIn's membership didn't even visit the website during the first three months of the year and those that did come stayed for relatively short periods of time. That's a dramatic contrast to Facebook, where its more than 500 million users are spending an increasing amount of time sharing their thoughts, playing games and posting pictures.
Read more: yahoo
