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Wall Street LinkedIn to IPOs

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by Peter Switzer

Two big news items came out of Wall Street last night. First, LinkedIn went public and the market loved it. And second, weakness in the US economy was largely ignored.

The Dow put on 45 points, or 0.36 per cent, to finish at 12,605.32 while the S&P 500 rose nearly three points to 1343.6.

In fact, experts believe LinkedIn – the first social networking business to go public – saved Wall Street from heading down.

For those who think this big debut is the dot-com crash scenario all over again, then you should know that LinkedIn gets some 40 per cent of its revenue from recruiters who buy their services. It has a more solid business model.

However, its price performance is reminiscent of the 2001 bubble. The company’s $45 a share price was forgotten as it opened up at $83 a share and hit $108 at one stage! CNBC says on that kind of price we’re talking about a $10 billion company!

Positives and negative

This good market news weighed against some ordinary economic readings at the moment for the US economy.

Let’s have a look at them:

Leading indicators fell for the first time since mid-2010
The Philadelphia Fed's business activity index for May fell to 3.9 in May from 18.5 in April. Economists expected a reading around 20.
Existing home sales dropped 0.8 per cent in April.

Against this, initial jobless claims are on the improve and that’s an important positive for an economy that needs to get unemployment down.

Also on the positive side, there are around 175 companies waiting to be listed on the US stock exchange and they are said to be of a very high quality.

These are bound to lean against some economic softness, which I suspect is going to be more temporary.

Successful IPOs can help negative share players embrace the market again and so this could be a critical turning point.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, May 20, 2011

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