What LinkedIn means for future tech IPOs

Marketplace Staff May 20, 2011
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What LinkedIn means for future tech IPOs

Marketplace Staff May 20, 2011
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STEVE CHIOTAKIS: The stock price of social networking site LinkedIn sits this morning at more than twice its initial public offering value. Former Treasury Secretary Larry Summers told an audience in Shanghai that could be indicative of another tech bubble forming.

Jill Schlesinger is editor-at-large at CBS/MoneyWatch. And she’s with us live from New York, as she is every Friday. Good morning Jill.

JILL SCHLESINGER: Good morning.

CHIOTAKIS: You’ve got the former treasury secretary now talking about a possible bubble forming. What’s making him believe that?

SCHLESINGER: Well, I think that there’s just this general resumption of risk taking going on and we saw that with the LinkedIn IPO yesterday. Here’s a company that made, you know, profits of about $15 million last year.

CHIOTAKIS: Yeah.

SCHLESINGER: And it’s worth $9 billion. I don’t think any sane investor would put that bet down. And yet tons of them did yesterday. And that may show somewhat of a willing sense of suspension of belief in terms of what companies really can do.

CHIOTAKIS: Well does that mean the stock price is going to go down? Is that what you’re predicting?

SCHLESINGER: Well I don’t know if I would predict that, but I’ll tell you what i would say. we did some analysis at Moneywatch.com and a bunch of studies have showed that the average IPO has returned just about one-third as much as the SMP 500 index, and yet people keep chasing them. And I think that does show that investors really act in irrational ways sometimes. But remember, it may not be rational for a long enough time so you know you don’t want to take a bet either way.

CHIOTAKIS: Just about 10 seconds Jill — what does this say about a Facebook or Twitter IPO down the pipe?

SCHLESINGER: Well, I know Facebook is supposedly worth somewhere between $70- and $100 billion on the secondary market right now. So this is going to be massive. Twitter — probably about the same size as LinkedIn. But I’ll tell you, this Facebook thing is going to be a gorilla when it hits the market and everybody’s going to want in on the action.

CHIOTAKIS: Jill Schlesinger in New York, Jill thanks.

SCHLESINGER: Thank you.

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