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LinkedIn Rallying 126%

LinkedIn IPO story updated with late-afternoon trading price.

NEW YORK ( TheStreet) -- LinkedIn (LNKD - Get Report) shares soared more than 126% to $102 in late afternoon trading Thursday, as investors clamored for a piece of one of the first social networking firms to hit the public markets.

Shares of the business-oriented social network opened at $83 -- double what it was priced at late Wednesday -- on its first day of trading on the NYSE. LinkedIn sold 7.8 million shares, or 8% of the company, netting it $351 million.

The company priced its shares at $45, the high end of its expected range. It's now valued at nearly $10 billion -- far above the $2.5 billion it commanded in the secondary markets just a few weeks ago.

While some tech watchers are hoping that LinkedIn's public offering will open the floodgates for a series of splashy tech IPOs including those of highly-valued social upstarts like Facebook and Zynga, it's more likely that today's offering will instead act as an important barometer of investor enthusiasm for Web 2.0 firms, helping other pre-IPO Internet companies gauge their worth in the public markets.

"Facebook and Groupon are definitely interested in following this," said Wesley Paul, a partner at Michelman & Robinson who works in the firm's corporate and securities department.

Given the scarcity of tech IPOs due to a variety of factors including lessons learned during the dot-com bust, LinkedIn's IPO represents somewhat of a turning point for the tech sector. The Web 2.0 firm has already commanded lots of early-stage investor interest.

Shares of LinkedIn were trading at $12 as of July 2009 on secondary market SharesPost, and crept up to $31 as of March. The firm raised the expected price range of its IPO by 30% on Tuesday in response to a surge in investor demand, to $42 to $45 a share, up from $32 to $35 a share.

While LinkedIn is profitable -- it posted $15 million in profit on sales of $243 million last year -- Francis Gaskins, president of IPO Desktop, pointed out a couple things in the firm's filing that investors should note. Due to investments in R&D, sales and marketing that the firm plans to make this year, LinkedIn actually expects to lose money over the next few quarters.

"It's very odd for an IPO -- especially one that's in demand -- to be able to come and do that," Gaskins told TheStreet.

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Tech skeptics also caution that like shares of recently-public tech firms Renren (RENN) and Demand Media (DMD), LinkedIn's stock may come crashing down to the earth in the next few weeks despite the early hype. The share price of Renren, the so-called Facebook of China, soared almost 30% after its IPO earlier this month before dropping below its offering price a few weeks later.

"All of these companies are subject to the laws of physics, so long-term, companies will be valued on the basis of earnings," said Tim Keating, president of Keating Investments, which makes investments in pre-IPO companies. "While it's encouraging to see this high valuation for LinkedIn, [the company] is going to have to justify it."

--Written by Olivia Oran in New York.

Where will LinkedIn shares close on Thursday, May 26?


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