This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

LinkedIn: Maybe Private Markets Were Right

NEW YORK ( TheStreet) -- There has been endless analysis about what the LinkedIn (LNKD - Get Report) IPO means for the company itself and for other tech companies that have yet to conduct IPOs.

There's one area that's been ignored, though, and that is the private market exchanges that now exist for buying and selling private company shares pre-IPO. There are two such exchanges: SecondMarket and SharesPost.

Interest in and media coverage of these exchanges has grown over the past year, as higher-valuation transactions began to occur involving Facebook, Twitter, Zynga, Groupon and LinkedIn.

It became possible for institutional and individual investors within the last couple of years to buy into these private firms' shares before they went public. For employees at these firms looking to sell, these new markets gave them liquidity for their shares.


Where will LinkedIn shares close on Thursday, May 26?

$200
$100
$45
$2.50

But as increasingly higher valuations began to be awarded on these markets to Facebook and Twitter, the mainstream media began to speak of them disapprovingly. Some wondered whether the exchanges were helping to fuel the higher valuations being paid for these companies.

I remember a commentator saying on TV a few months back, "You know you can't sell on these exchanges, you can only buy." Well, that's not true. There couldn't be a market if there wasn't a seller as well as a buyer.

The Securities and Exchange Commission even announced a few weeks back that it was looking into these exchanges. Into what exactly, it's not clear. And there haven't been any updates on that investigation since.

However, last Thursday, I was on TV with someone from SecondMarket, discussing the LinkedIn IPO. He was asked what LinkedIn had recently traded at on his market pre-IPO. "$35," he replied, "about a week ago."

I'm not here to defend LinkedIn's pricing. I think it's wildly overvalued here and would be an attractive buy at $20 to $25. (Shares recently changed hands around $88.)

But I do think it's interesting that LinkedIn was actually underpriced on the private market exchange, compared to what it's fetching in the public markets.

And so what does this say about Facebook? I think it suggests that when Facebook goes public (which looks like it will happen this fall) the stock will probably trade for much more than its recent private market valuations.

Facebook recently changed hands at around $85 billion privately. When it does go public, I suspect it will trade for around $120 billion.

At the time of publication, Jackson had no positions in companies mentioned.

Readers Also Like:




Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
LNKD $200.77 3.00%
AAPL $130.54 0.20%
FB $80.29 1.39%
GOOG $533.99 0.35%
TSLA $249.45 -0.54%

Markets

DOW 18,040.37 +29.69 0.16%
S&P 500 2,111.73 +4.34 0.21%
NASDAQ 5,082.9290 +12.9030 0.25%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs