News & Resources

Social networking ascent differs from dot com bubble

May 28, 2011 Karen Umpierre

A generous business valuation of social media website LinkedIn's stock has many experts and professionals believing a new tech bubble may be on the horizon. Crain's New York Business reports that LinkedIn saw its shares rise to $94.25 on its first day of trading, for a total value of nearly $9 billion. The stock's shares have since dropped into the $80s, but its overall value hasn't waned much, still hovering close to $8 billion. However, LinkedIn is slated to lose money over the next few years as it spends its IPO earnings to expand operations. The fact that it trades at nearly 20 times its revenue is making some investors skeptical. "There's no convincing argument as to why things are different [than in the dot-com bubble]," David Menlow, of IPO Financial, tells Fox Business. "There's nothing out there in terms of growth expectations or financial modeling. It's like trying to nail Jell-O to a wall." Conversely, Dennis Fong, a serial entrepreneur, adds that there are distinct differences between valuations of current Web 2.0 offerings - Facebook, Groupon, LinkedIn - and the internet bubble of a decade ago. "There's real revenue and profits from these companies, and their margins are much better," Fong tells the news source.