LinkedIn Sets an IPO Price Range, but a Boost Is Likely

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LinkedIn threw investors a bone on Monday, releasing the initial pricing range for its long-awaited IPO. The popular social networking firm, which gears itself toward business-related schmoozing and résumé-posting users opened the game with a pricing range of $32 to $35 a share. That would raise the company and its private investors around $273 million, assuming it launches at the high end of its initial pricing range and sticks with its current plan to float roughly 7.8 million shares in the offering.

However, Paul Bard, vice president and an IPO expert with Renaissance Capital, says investors will likely see LinkedIn raise both the number of its shares offered and increase the pricing range before its IPO debuts. LinkedIn currently has its IPO tentatively slated for May 18.

"I'm sure this deal will be heavily oversubscribed, so it won't be surprising to see its offering increased" Bard says. "This is an IPO that every growth [fund] manager will want to own. It's one of those must own stocks."

The Beginning of the Next Wave

Investors are salivating over social networking stocks. Just last week, Renren (RENN), a Chinese social networking giant, kicked off its IPO priced at $14 a share. Renren's shares rocketed as much as 71% to $24 a share on that first day of trading, before coming back to Earth to close at $18.01.

Renren's market cap is currently north of $4 billion and LinkedIn's valuation isn't too far behind. Based on its outstanding shares and the high end of its IPO pricing range, LinkedIn is currently valued at approximately $3.3 billion. Facebook, by comparison, has an estimated value of $50 billion, based on a recent investment involving Goldman Sachs (GS).

"LinkedIn will be one of the most exciting IPOs we have seen in some time and there will be a tremendous amount of enthusiasm for this company," Bard said. "It'll be the beginning of the next wave of Internet IPOs we'll be seeing over the next 12 to 18 months."

Since the start of the year, there have been 55 IPOs that have hit the market, excluding special purpose acquisition company deals. Of this group, technology IPOs accounted for 32.7% -- the largest slice of the pie -- according to Renaissance Capital's IPO data.

And while the average first day pop of an IPO stock has risen slightly to 11% this year, the market is far from returning to the go-go days 1999, near the height of the Internet bubble, when IPO's averaged nose-bleeder gains of 72% on their first days of trading.

Bard said institutional investors are probably keeping LinkedIn's investment bankers hopping, inasmuch as the social networking company is pushing to launch its IPO nine days after setting its initial pricing range. Typically, companies will usually wait at least two weeks from that point before floating an IPO, Bard noted.

"By the end of this week, we'll probably see a good indication if they're planning to bump up the pricing range," says Bard.

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