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LinkedIn IPO: Not a 'Netscape Moment'

Stocks in this article: GS

LinkedIn IPO story updated with news of its pricing at $45 a share

NEW YORK ( TheStreet) -- While stock market reception for LinkedIn will be an important barometer for gauging investor appetite on social networking firms, the highly anticipated IPO Thursday will likely be far from the "Netscape moment" that tech watchers are hoping for: a watershed IPO that triggers a glut of other splashy tech offerings.

"Companies like Facebook and Zynga will be cheering for a successful LinkedIn offering, but the IPO will only have implications for companies that look a lot like LinkedIn," said Lise Buyer, founding principal of Class V Group, which advises companies who are considering going public.

Buyer noted that LinkedIn's public debut will be mainly used to determine whether sky-high valuations for Facebook and other private tech firms, which have traded actively on secondary markets, can hold up in the public arena.

>>JP Morgan Taking Tech Bank Lead

"If LinkedIn does well in the public markets, then other tech companies will compare themselves against it and say 'ours should be even higher,'" said Caine Moss, a partner at Silicon Valley law firm Goodwin Procter.

While LinkedIn is often grouped with Facebook because both companies focus on the social networking space, they operate at vastly different scales. LinkedIn is much smaller; it has just over 100 million users and posted $243 million in sales last year and earnings of $15.4 million.

Facebook, in comparison, has more than 600 million users and reportedly earned $1.2 billion in revenue and $355 million in net income for the first nine months of 2010. It was valued at $50 billion after a funding round in January from Goldman Sachs (GS).

LinkedIn, which will debut on the NYSE Thursday under the symbol "LNKD," priced its offering Wednesday at $45 per share, at the high end of its expected range. Shares of LinkedIn were trading at $12 as of July 2009 on secondary market SharesPost, and crept up to $31 as of March. Including the overallotment option, the company is selling roughly 9 million shares in its public debut, raising roughly $406 million.

While LinkedIn may lack the caché -- and size -- of more familiar consumer-facing companies like Facebook and Groupon, tech watchers still expect the company to benefit from a first mover's advantage.

"There's a bit of scarcity that goes into this offering because there hasn't been a sexy consumer Internet company of this size and maturity for a while -- investors want a piece of it," said Moss.

Some see LinkedIn's IPO as evidence of a new tech bubble, where early-stage investors have pinned massive valuations to buzzy, but not always profitable, private companies.

"If these guys go public with a $3 billion to $4 billion valuation, others will follow -- at some point we're going to run out of quality companies to buy," said Steve Blank, who teaches entrepreneurship at the University of California, Berkeley and Stanford University. "It's all about finding the quality companies and making sure you're not buying the last one out, because then you'll get screwed."

--Written by Olivia Oran in New York.

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