Tech Bubble 2.0


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At the turn of the millennium, investors learned a hard lesson about betting serious capital on untested technology ventures with minimal cash flow and ambitious growth plans. Trillions of dollars were destroyed when the dot-com bubble burst, an effect compounded by the terrible events of September 11, 2001. 

A decade later, LinkedIn (LNKD), a professional social-networking site with 100 million or more registered users, filed for its initial public offering. Investors snapped up the shares at a valuation of $45, and in the site's first day of trading on Thursday, it quickly doubled, closing at $94.25 per share.

What does the Santa Monica, California-based site offer to justify such a rich valuation? Well, for one thing, it resembles Facebook. In the absence of an actual Facebook IPO, investors are desperate to get a piece of the social media action. Everyone wants to ride on the coattails of a company which could be "the next Google" (GOOG).

Unlike many of the speculative ventures of the dot-com era, LinkedIn at least has some profits: $15.4 million on revenues of $352.8 million. At a more rational level, the company's offering might make sense. At more than 500 times earnings, however, it seems clear that institutional and retail investors are just champing at the bit until Facebook finally goes public.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: News Headlines , Investing Ideas , Technology , US Markets
Referenced Stocks: GOOG , LNKD

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