The big IPO investment news in the innovation economy this week was LinkedIn and its valuation.
Fast company set our some P/E maths:
At the $45 per share opening price, LinkedIn stock traded at 46 times its projected 2011 earnings. Anything above 25 and a company is expected to have unusually high growth projections. Either that, or they’re in bubble territory.
The positives on LinkedIn can be seen in the following paragraph from FC:
LinkedIn’s entire business model rests on amassing as many users as possible–particularly top-shelf professionals–and getting them to invest the time in keeping their profiles up-to-date. That’s because LinkedIn makes its nut from selling services to recruiters and advertisers who want to reach the company’s white collar members.
The Australian creates the negative case (many Australians do on U.S. stocks), in short — cheap money, high tide stocks:
The Fed’s super-easy policy, including the about-to-conclude purchase of $US600 billion ($562m) of Treasury securities, was designed in part to perk up riskier investments, such as stocks, with the view to create beneficial effects in the real US economy.
The final price at $104 seems high, after a launch at $45.
I’m not sure about LinkedIn price, but for 2thinknow I can see the investment in the innovation economy — especially exciting SMEs and start-ups — as good news in net trend terms.
It may not be the end of the world today (!) but nascent trends are now starting.
Network Goods & Geo-think
Actually, from my view, LinkedIn is a ‘network good’. I don’t have a view on the stockmarket price itself, but would observe LinkedIn is a key piece of identity architecture on the internet, that can be leveraged. And the internet can be leveraged to change the value of geography.
The virtual landscape will reshape the value of the real landscape, in a networked economy.
Innovation Economy tool.
So, there’s a lot of life in LinkedIn yet, irrespective of the stock price. Which puts me in the positive believer camp, as there are many new innovative applications for LinkedIn that have not yet been implemented. Those new applications broaden the value of innovation…
Whilst LinkedIn has been around since 2003, the innovation economy is new and in play.