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LinkedIn Debuts With a Bang, but Is It Worth $9B?

Fin - Breakout - US

After being priced at $45 a share, LinkedIn (LNKD) opened for trading today somewhere in the neighborhood of $80 a share. For those of us who remember, and traded, the Netscape IPO -- which was priced at $20-something and opened over $70 -- LinkedIn's opening quote triggered a flashback not unlike the déjà vu your hippie parents get any time they hear a Canned Heat song.

So it was only with grim determination that Matt Nesto and I were able to keep straight faces while welcoming Eric Jackson, the founder of Ironfire Capital, to join us to discuss LinkedIn's prospects now that it's valued somewhere around $9 billion. Jackson was suggesting caution when LinkedIn was merely valued at around $4 billion. Suffice it to say, his opinion hasn't changed.

I could run through some of the unusual valuation metrics for LNKD -- worth 4 times Monster Worldwide (MWW), 20 times this year's sales, an infinite times expected profits, $90 per user and $30 for every man, woman and child in the United States -- but you can read that anywhere. If it doesn't go without saying, I'm not a huge bull on LNKD shares; I really don't think anyone should be getting long LNKD today. If I owned LinkedIn shares, I would sell them. I believe Investment Bankers are literally rubbing their hands together and laughing at retail investors bidding the shares up 90 percent today. I suspect the number of shares sold to the public were artificially constrained in order to inflate the value of the shares trading today, thus serving the dual purposes of stoking the IPO market as a whole and publicizing LinkedIn itself. If the shares trade at $200 tomorrow, the opinions in this paragraph will not change, though I reserve the right to put them in all caps.

We asked Jackson what LinkedIn may do with their suddenly valuable stock currency. I suggested perhaps an acquisition of Monster or some other employment company. Jackson shot the idea down, noting that LNKD is positioning itself as next-generation, meaning a merger or acquisition of Monster wouldn't benefit the company in a meaningful way. Instead Jackson offered the notion that LNKD would be more likely to acquire a software company to help the site handle its growing traffic and produce more income from the 100 million or so users who generated about $4 a head on average for LNKD last year.

Nesto, apparently enjoying his own Canned Heat moment, threw out the notion that LNKD itself may make an attractive target. Jackson chuckled (a theme of the segment) and suggested a buyer such as Microsoft (MSFT) would have been much wiser buying LinkedIn two weeks ago. At current share prices, LinkedIn has certainly evolved from the hunted into a hunter in terms of acquisitions.

We want to hear what you think about LinkedIn or commodity trader Glencore's IPO or the now publicly traded Private Equity firm Apollo. Should any of these companies be public? Do their IPOs signal a top of the markets or the start of a much bigger move? Are we missing part of the LinkedIn story that justifies the $9B valuation?

Let us know in the comment section below, via BreakoutCrew@Yahoo.com or by looking me up on LinkedIn (NB: I haven't actually looked at my LNKD account since establishing it at some point a few years ago).