Shares of LinkedIn (LNKD) rose 109 percent from the offering price of $45 per share on their first day of trading, May 19, making it the third-best performing IPO of the current bull market and the fifth-best performing IPO since 2001. Inevitably, talk of another tech stock bubble ensued. So much so that LinkedIn CEO Jeff Weiner felt compelled to address the bubble chatter in interviews: there is no bubble, he's happy with the share price, and his company is in it for the long haul, he said. Of course, LinkedIn's performance looks muted if you compare it to the 400 percent-plus first-day pops of the dot-com era's highest flyers. But the $94.25 per share first-day closing price still represents a massive 554 price-to-earnings ratio based on last year's earnings of 17 cents a share.
In fact, Bloomberg Businessweek was already calling the California social networking pile-on a tech bubble back in April, before the LinkedIn debut. Investors have been throwing capital at tech giants like Facebook, Zynga and Groupon, which are all planning IPOs. Few think these companies will disappear if the bubble does pop. But hordes of copycats and niche social networking shops without clear business models have appeared too, and investors have been equally eager to chase these startups. Sound familiar?