LinkedIn Vulnerable to Big Decline (LNKD, QPSA, RENN, SINA, UNTD)
After seeing its shares more than double in their debut last week, LinkedIn (LNKD), the social networking site for professionals, is experiencing its first truly rough day as a public company as its stock is plunging 9%. Some of that tumble may be attributable to broader market weakness, but analysts are leery of the company’s lofty valuation and short sellers look primed to hammer the stock.
That’s not good news for LinkedIn shares, nor is it good news for the Social Networking Stocks, which is plunging 5.1% today. Heading into the start of trading today, LinkedIn had a market value of $8 billion despite turning a profit of just $15 million last year, the New York Times reported.
Making the stock all the more vulnerable to a wicked decline is the fact that restrictions on shorting the stock will be lifted on Tuesday. However, one trader did tell the Financial Times that LinkedIn’s float is so small, just 9 million shares, that it may be ineffective on a cost basis to short LinkedIn because the stock will be hard to borrow.
Other analysts argue that LinkedIn shares have received such intense enthusiasm simply because investors are waiting for more marquee social networking names such as Groupon and Facebook to make their debuts as public companies. The company trades for 25 times 2011’s expected revenue, the Times reported, citing Morningstar.
Other social networking names are taking it on the chin today as well with Quepasa (QPSA) and Renren (RENN), China’s Facebook, both plunging 4%. SINA (SINA) is also down 4% while United Online (UNTD) is lower by 2%.
Investors can track the Social Networking Stocks for performance trends and a suite of other metrics at tickerspy.com.
More on this topic (What's this?)
Reflections on the LinkedIn IPO and the Usability of LinkedIn Itself (Phil's Favorites, 5/20/11)
Reflections on the LinkedIn IPO and the Usability of LinkedIn Itself (GreenLightAdvisor Views, 5/20/11)
LinkedIn: Monster Comparisons Haunting (Wall Street Sector Selector, 5/23/11)
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