by Gary Rivlin Info
Journalist Gary Rivlin is the author of five books, including Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business. He has worked as a staff reporter for The New York Times, where his beats included Silicon Valley and New Orleans after Hurricane Katrina. He is a special correspondent for Newsweek and The Daily Beast.
After its stunning market debut Thursday, there’s no doubt that LinkedIn is a bubble. But contrary to the crazy comparisons being made in the press, it doesn’t signal a repeat of the 1990s dot-com bubble, argues Gary Rivlin.
When Netscape made its stock market debut in August 1995, its share price spiked 109 percent, blowing the first large breath into the dot-com bubble. On Thursday, the social networking company LinkedIn had an eerily similar first day as a publicly-traded company as its shares rose rise by 108 percent.
Linkedin CEO Jeff Weiner (front center) and founder Reid Garrett Hoffman (rear center, with glasses) react at the trading post of the New York Stock Exchange on May 19, 2011, during the initial public offering of the company. (Photo: AFP / Getty Images)
Is it any wonder the world was ready to declare Silicon Valley in the midst of another Internet bubble? Especially when the stock market instantly gave LinkedIn, a solid but second-tier Valley success story, a value greater than Southwest Airlines, U.S. Steel, Hertz, Delta Airlines and Tyson Foods?
But those quick to declare a bubble strike me as akin to the shell-shocked war veteran who flinches each time he hears a loud noise. Sure, a share in LinkedIn is preposterously expensive. Associated Press technology writer Michael Liedtke, who drew the Netscape comparison, points out that the average tech company in the Standard & Poor’s 500 index has a price-to-earnings ratio of 15. By comparison, LinkedIn finished its first day on the stock market with a P/E ratio of 554.
LinkedIn is a single company. And as crazy as its stock market debut was this week, it still doesn’t come close to matching the laughing-gas nuttiness that marked the second half of the 1990s.
“There was an unmistakable echo of the dot-com boom Thursday on Wall Street,” Liedtke began his LinkedIn dispatch. That was the kind of line one read a lot over the past 24 hours, running under the byline of any number of tech and financial writers.
Except that, where the late 1990s saw hundreds of Internet startups going public, most of them half-baked concoctions brought to market before they had earned a dime, LinkedIn is an eight-year-old company with 1,300 employees that booked nearly a quarter of a billion dollars in revenue last year.
That’s not to discount the significance of LinkedIn’s stock market debut, which ranks as the biggest since Google in 2004. Whether we find ourselves in another tech bubble is a question that has been popping up on and off for years now. The first time I remembering hearing it was 2005, when a venture capital firm’s investment in Facebook gave this as-of-yet-ubiquitous social networking company a valuation of $100 million. The question came up again earlier this year when Goldman Sachs appraised Facebook as worth $50 billion for any Goldman client desiring private shares in a pre-IPO Facebook.
My attitude: who cares if a bunch of elites with deep reservoirs of money and the right connections prove willing to pay lofty prices to own a piece of the future? What made the dot-com bubble so profound and traumatic an event wasn’t that venture capitalists and favored clients at a big investment bank took a big financial hit. It was the collateral damage it caused to the wider economy and to people's 401(k)s.
“We always have lots of little bubbles in Silicon Valley,” says Valley wise man Paul Saffo. “The problem with the bubble in the late 1990s is that everyone’s grandmother got involved, and that was bad because it made the bubble too big, and it made the price of failure too high.”
Now that LinkedIn is selling shares to the general public, anyone with a little extra cash laying around can get involved. And already we see that the LinkedIn IPO was good news for the wealthy and the well-connected and bad news for pretty much everyone else wanting a piece of the action.
12 May 20, 2011 | 9:03am Twitter Email Share var OutbrainPermaLink=document.location.href.replace(document.location.search, '').replace(/\/\d+\/$/,'/').replace(document.location.host, 'thedailybeast.com'); if(OutbrainPermaLink.search(/blogs-and-stories/)>=0){ OutbrainPermaLink += "full/"; } var OB_Template = "The Daily Beast"; var OB_demoMode = false; var OBITm = "1255455386150"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } » Meg Whitman Speaks » LinkedIn's Market 'Insanity' » Too Big to Fail? Geithner Says No » LinkedIn's Big Ripoff » How Donald Trump Trashed His Brand Business , Technology , Technology , Facebook , Social Networking , Ipo , Linkedin , Tech Bubble (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: JohnnyAces
Actually the P/E is worse than 554. LinkedIn will have no earnings this year so the P/E is N/A. Don't touch this stock at these levels. You're a sucker if you do. Until we get a good feel for future earnings there is no way to put a fair valuation on this company.
Flag It | Permalink | Reply 10:47 am, May 20, 2011 gatorbass1No Bubble ? Facebook goes out of business? 2000 people lose their jobs. 100,000,000,000 dollars of wealth is destroyed. Not one thing was created. Its the mother of all bubbles.
Flag It | Permalink | Reply 11:27 am, May 20, 2011 $('#c_total span').html('2'); $('#c_total').show(); Share this comment on FacebookThank you. As a first time user, your comment has been submitted for review. It can take anywhere from a few hours to a day or two for your comment to be reviewed, depending on the time of week and the volume of comments we receive.
Please log in to leave comments.
//'); document.write(''); //]]>GOP Govs' Popularity Plummets
by John AvlonInfoJohn Avlon's most recent book Wingnuts: How the Lunatic Fringe is Hijacking America is available now by Beast Books both on the Web and in paperback. He is also the author of Independent Nation: How Centrists Can Change American Politics and a CNN contributor. Previously, he served as chief speechwriter for New York City Mayor Rudy Giuliani and was a columnist and associate editor for The New York Sun.
X CloseZsa Zsa's Sordid Final Days
by Lorenza MuñozInfoLorenza Muñoz is a freelance writer based in Los Angeles who recently completed her first novel, The Weight of Flight. For 14 years she was a staff writer at the Los Angeles Times covering politics, crime, entertainment and business. Her essay, American Girl, was published in the anthology, Borderline Personalities: A New Generation of Latinas Dish on Sex, Sass and Cultural Shifting by HarperCollins. Lorenza is currently an adjunct professor of Journalism at the USC Annenberg School for Communication.
X CloseBehind Arnold's Deception
by Jacob BernsteinInfoJacob Bernstein is a senior reporter at The Daily Beast. He has also written for New York magazine, Paper, and The Huffington Post.
X CloseNATO Hammers Gaddafi's Navy
After Libyan vessels laid mines in sea lanes.
Bibi and Obama Clash at White House
Netanyahu rejects plan based on 1967 borders.
Strauss-Kahn Taps Ex-CIA Firm
For informal public relations.
.weLike { text-align: center; font-family: "Arial"; font-size: 12px; line-height: 1em; } .weLike li { padding: 10px 0; background: url("http://www.tdbimg.com/image/dot_h.gif?v=7.82") repeat-x center bottom; list-style-type: none; } .weLike li.last { background: none; } .weLike li .source { font-style: normal; color: #666; display: block; margin-bottom: 5px; text-transform: uppercase; } .weLike li .sourceStory { font-weight: bold; color: #000; } .weLike a:hover { color: #f1261d; } .weLike .weLikeHeader { position: relative; width: 100%; height: 14px; margin-top: 15px; } .weLike .weLikeHeader span { display: block; height: 14px; width: 97px; background: blue; position: absolute; top: 0; left: 50%; margin-left: -48px; background: #fff url("http://www.thedailybeast.com/images/widgets/stories-we-like/header.png") no-repeat center center; } Stories We Like EW.com Sarah Michelle Gellar Talks New Show 'The Ringer' AskMen Top 10 Signs You're Not An Alpha Male Newsweek Magic Johnson: A Career in Pictures Christian Science Monitor Israel's 1967 Borders: 3 Reasons Obama's Stance Is A Very Big Deal Political Wire Four Things You May Not Know About Jon Huntsman The Hollywood Reporter Why Dick Ebersol Resigned from NBC Sports My Daily Intel Executive Genevieve Bell Tells Us How She Got to the Top Shelter Pop Spend the Weekend at Frank Sinatra's House Fast Company The 100 Most Creative People in BusinessLinkedIn's Market 'Insanity'
by Gary RivlinInfoJournalist Gary Rivlin is the author of five books, including Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business. He has worked as a staff reporter for The New York Times, where his beats included Silicon Valley and New Orleans after Hurricane Katrina. He is a special correspondent for Newsweek and The Daily Beast.
X CloseLinkedIn's Big Ripoff
by Gary RivlinInfoJournalist Gary Rivlin is the author of five books, including Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business. He has worked as a staff reporter for The New York Times, where his beats included Silicon Valley and New Orleans after Hurricane Katrina. He is a special correspondent for Newsweek and The Daily Beast.
X CloseAn Empty Offer From the Super-Rich
by Gary RivlinInfoJournalist Gary Rivlin is the author of five books, including Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business. He has worked as a staff reporter for The New York Times, where his beats included Silicon Valley and New Orleans after Hurricane Katrina. He is a special correspondent for Newsweek and The Daily Beast.
X Close "?Supernatural' finale: What did you think? Plus, does it rank among the best finales? This week's campaign 2012 recap: Newt Gingrich's seven days of D'ohs! Which A-list music acts should the "?Idol' finalists duet with in the finale? What You Didn't See On Thursday's "?American Idol:' Ryan Seacrest Proves His Worth, Finalist Dads Hug It Out Jennifer Lawrence Tries to Explain What 'Hunger Games' is About Too Big to Fail: A Look at the Movie's Cast and their Real Life Characters Pricey Presidents and Bargain Pundits Oprah's TV Evolution: 25 Fashions for 25 Years Kelly Ripa Chats Party Disasters and "The Real Housewives of New Jersey" Unsolicited Love Advice: 'Real Housewives' Edition Ginnifer Goodwin Breaks Off EngagementSign me up for The Daily Beast's daily news emails and breaking news alerts.
Sign me up for The Yes List, weekly cultural recommendations from The Daily Beast.
I'd like to receive e-mail notifications as:
Text Only HTMLSign me up for occasional special offers sent by The Daily Beast on behalf of select sponsors, and for occasional special offers from IAC companies.
Please register to manage your email preferences and comment on the site. Home | Cheat sheet | Buzz board | Big Fat Story | Blogs & stories | Videos | Galleries Sexy Beast | Book Beast | Hungry Beast | Art Beast | Giving Beast COPYRIGHT © 2008-11 The Newsweek / Daily Beast Company LLC , ALL RIGHTS RESERVED. SITE DESIGN BY CODE AND THEORY. This Web Accessibility icon serves as a link to download eSSENTIAL Accessibility assistive technology software for individuals with physical disabilities.Partner Sites: Ask Kids| Bloglines| Citysearch| Expedia| Hotels| Hotwire| Reference| Thesaurus
THANK YOU Your account with The Daily Beast has been created. Username: First Name: Last Name: Postal/Zip Code: Country: United States Afghanistan Albania Algeria American Samoa Andorra Angola Anguilla Antarctica Antigua and Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bermuda Bhutan Bolivia Bosnia and Herzegowina Botswana Bouvet Island Brazil British Indian Ocean Terr. Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Islands Central African Republic Chad Chile China Christmas Island Cocos (Keeling) Islands Colombia Comoros Congo Cook Islands Costa Rica Cote d'Ivoire Croatia (Hrvatska) Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic East Timor Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Falkland Islands/Malvinas Faroe Islands Fiji Finland France France, Metropolitan French Guiana French Polynesia French Southern Terr. Gabon Gambia Georgia Germany Ghana Gibraltar Greece Greenland Grenada Guadeloupe Guam Guatemala Guinea Guinea-Bissau Guyana Haiti Heard & McDonald Is. Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Israel Italy Jamaica Japan Jordan Kazakhstan Kenya Kiribati Korea, North Korea, South Kuwait Kyrgyzstan Lao People's Dem. Rep. Latvia Read Full Article »