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Blockbuster LinkedIn IPO Draws Google Comparisons

First day trading sees 140% spike

Reid Hoffman: Shall enjoy the finer things. | Photo by Johannes Simon/Getty Images for Hubert Burda Media

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Reid Hoffman can rest easy tonight. As the founder of the first U.S.-based social network to go public, he’s just become an overnight gazillionaire. Or billionaire, at least. His 19 percent stake in the company was worth $1.5 billion when shares were trading at $81; now they’re hovering around $107.

LinkedIn shares jumped more than 140 percent in its first day of trading, peaking at $122 and valuing the company at $10 billion. For reference, that’s more than 521 times the eight-year-old company’s 2010 profits. There’s something to be said for being first to market.

LinkedIn’s underwriters managed to underestimate demand that much, even after last-minute increases of the company’s price from $10, to $42, to $45. LinkedIn could have raised double that, despite the fact that prior to its public debut, the company was only valued at $2.5 billion on private secondaries exchange SharesPost. The lesson here? Get ready for Facebook's IPO. At a secondary market valuation of $70 billion, its public market debut is likely to be huge.

Naturally the setting is ripe for more bubble talk. LinkedIn investors are irrationally exuberant, or they’re rich, they’re chasing a bubble, they’re jealous, and maybe, they’re about to get fired. The raging share price has garnered comparisons to the 2004 IPO of Google, which is the last large U.S. Internet company to go public.