LinkedIn just went public last week. The IPO was valued at $45/share and by the end of the trading day the value doubled giving LinkedIn a value of $9 Billion. But is LinkedIn really worth $9 Billion?
If you are placing the valuation on LinkedIn based on its member base of 50 million people, then Facebook who has 13 times that amount would be worth $117 Billion. That’s quite a big valuation for a business who hasn’t come close to reaching profitability yet.
I realize of course that valuations for Internet companies aren’t just based on their number of members. It’s based on something even dumber… Speculation. It’s that pesky little problem that caused the tech bubble of the 90′s when everybody was rushing to jump on-board the dotcom boom. The massive speculation and over-valuation of companies led to a huge tech bubble.
This is sadly happening all over again.
Creditscore.net put together a great Info-Graphic that discusses LinkedIn’s road to the IPO.
Check it out:
*click to image enlarge
Source: The Credit Score Blog