The LinkedIn Mania

Editorial do WSJ

A company forecasting a loss for this year went public yesterday and quickly began trading at more than 30 times its annual revenues. And this is the social media company that tech analysts don't like.

We're referring to Thursday's initial public offering (IPO) on the New York Stock Exchange for LinkedIn. Offered at $45, which was up $10 from estimates only a week earlier, shares in the career-networking website opened at $83 and then zoomed to $122 for a valuation above $11 billion, before closing at $94. The IPO market hasn't seen exuberance like this, rational or irrational, since the 1990s.

The optimist in us hopes that this is a welcome return to economic animal spirits, with investors willing to bet on budding companies, and entrepreneurs willing and able to tap the public markets for capital. Companies with Internet business models have been enjoying fabulous valuations in their private placements, including Facebook, Twitter and Groupon, among others. We have no idea whether LinkedIn will be the next Google or the next Pets.com, but such risk-taking is essential if America is going to escape its post-panic malaise.

On the other hand, yesterday's remarkable price action also has a whiff of the manias that accompanied recent monetary-induced bubbles. Investment bankers are paid to price IPOs based on market expectations, so when shares are bid up as much as 171% above the issue price in a few hours, something more is going on than the business fundamentals.

In that sense, LinkedIn's founders can probably thank Ben Bernanke. The Federal Reserve Chairman has kept interest rates at near-zero for close to 30 months, surplus dollars are sloshing around the world, and investors are desperate for higher returns. They are thus walking out further on the risk curve, betting on junk bonds, gold and other commodities, Midwest farm land and emerging markets. Internet social media plays are as a good a bet as any.

Everybody is happy when these prices keep going up, and the definition of a mania is when no one expects them to fall. But as we've learned over the last decade or so, manias are also defined by volatility and overshooting. The recent plunge in silver and oil was a warning that what goes up rapidly can come down even faster. The longer they last, the more manias misallocate resources as investors ignore fundamentals and chase the crowd.

LinkedIn may prove to be a great business success that justifies its first-day pricing, and so much the better for the economy if it does. But we'd feel better about soaring valuations if they occurred at a time of robust economic growth and normal monetary policy.

Comentário: A revista britânica The Economist já veio com matéria de capa semana passada falando da nova bolha de tecnologia. O IPO da LinkedIn é mesmo um sintoma e tanto! As ações chegaram a subir mais de 100% ontem, no primeiro dia de pregão, após uma avaliação da empresa em mais de US$ 4 bilhões! É isso aí, Ben. A política de estímulos do Fed fazendo aquilo que sempre fez. Greenspan entende bem do assunto. Depois, vão culpar o "mercado livre" uma vez mais pelo sofrimento gerado após o estouro desta bolha. Alguém quer apostar?