LinkedIn investors strapped in for a rocket ride Thursday, as its newly minted shares more than doubled during its public debut. The social networking giant, which priced its IPO at $45 a share Wednesday evening, closed its first day of trading at $94.25 a share, up 109.4%.
LinkedIn (LNKD) saw its shares rise as high as $122.70 during intra-day trading before settling back under the $100 mark. Nonetheless, the social networking site that caters to business professionals landed the title of largest first-day gainer for a U.S. IPO since OpenTable (OPEN) launched its offering back in May 2009, when it ended its first day of trading up 60%, according to an IPO report by Renaissance Capital. When LinkedIn began trading on the New York Stock Exchange this morning, it opened at $83 a share - an 84% pop over its IPO price.
Some of this year's IPOs have also seen sizable first day pop. China-based Qihoo360 (QIHU) had a 135% return on its first day of trading. Car sharing network Zipcar (ZIP) closed up 56% from its IPO in its debut. Cornerstone OnDemand (CSOD), a global provider of on-demand talent management software, had a 47% first day return.
A solid performance from LinkedIn, the first US social media IPO, could pave the way for other social networking firms to take the IPO plunge. As mentioned in our 2010 Global Annual IPO review, the shadow IPO backlog contains names such as Facebook, Zynga and Groupon.
Over the next week or two, investors should expect to see LinkedIn's shares settle into some type of trading range, says Paul Bard, vice president of Renaissance Capital and an IPO expert.
"The range could be below where it's trading now, but I've also seen some IPOs open strongly and continue to trade up after that. It's quite possible for LinkedIn to go either way," Bard says.
Next Up: The First Quarterly Report
The next catalyst for LinkedIn's stock will be its first quarterly report that it issues as a public company, Bard noted. Wall Street will not only be looking at the company's metrics like revenue, profits, gross margins and future expectations for growth, but also whether the company does a good job at accurately forecasting its business and guidance to the street. Bard added that the social networking giant addresses two large markets that could each evolve into $1 billion-plus markets: advertising and also recruiting or hiring solutions aimed at business professionals.
LinkedIn's lock-up, which tends to expire six months after an IPO for most companies, is not anticipated to put pressure on the company's share price, Bard says. When a lock-up expires, insiders, employees, venture capitalists and others are free to sell their shares on the open market, potentially flooding the market with more shares and putting pressure on the stock price.
Bard, however, believes LinkedIn will likely bundle up these shares in an organized secondary offering, which would have more control in the way these shares are released into the market.
Despite LinkedIn's soaring share price on its first day of trading, it's not to the astronomical levels seen with IPOs during the Internet bubble in the late 1990s. During that period, there were 10 IPOs that closed up over 400%, Bard said.
"LinkedIn did well, but it's not reminiscent of the go-go days of the 1990s. In fact, if LinkedIn did it's IPO then, it would be considered a disappointment," Bard laughed.