The Journal’s Evan Newmark, a former investment banker whose good column on IPO bubble dynamics confirms that LinkedIn’s revenue growth is slowing, has some more numbers:
After all, what is the sense in putting a $4.3 billion valuation on a company with slowing revenue growth and zero projected profits for 2011 or in paying $43.50 for a share that post-IPO will have a tangible book value of just of $3.38, or one-thirteenth what you just paid.
Of course, there isn’t much sense. But that doesn’t matter. Here’s what does: The belief that someone out there will pay even more for the shares.
Newmark’s numbers and all the other ones above are based on LinkedIn’s IPO pricing of $45. As I type this, the stock is up a stunning
99 105 122 135 percent in its first couple hours of trading. So all these high multiples from above? More than double them.
LinkedIn is now worth $10 billion on the stock market. Which means it’s trading at 41 times last year’s sales—higher than Facebook’s huge valuation. It has a trailing price-to-earnings ratio of 650 (and remember, it will lose money this year). Newmark’s tangible book value number is now one-thirty-first of its stock price.