First US social network flotation values LinkedIn at $4.9bn

LinkedIn has successfully taken itself public at a value of $45 per share, the first US social network to do so - but not the last.

The company sold 7.84 million shares at its initial public offering (IPO), raising $352.8m and valuing the company at around $4.9bn.

LinkedIn had originally planned to sell stock in the $32 to $35 range, but upped this to $42 to $45 at the last minute after strong demand was reported.

The valuation dwarfs the $734m IPO of Chinese social network Renren earlier this month on the New York Stock Exchange, but the enthusiasm shown in both IPOs will be encouraging for other social media companies considering the move.

The biggest of these is Facebook, which is widely expected to announce an IPO within the next 12 months. Some estimates have put the potential value as high as $70bn.

Skype was also considering an IPO before being bought by Microsoft for $8.5bn. Twitter is also reportedly considering a flotation, and GroupOn turned down a $6bn offer from Google in December so that it could take itself public.

Van Baker, a research vice president at Gartner, told V3.co.uk at the time that he was mystified by GroupOn's valuation, considering the increasing competition in its business. He fears that another bubble in technology stocks is underway, and he is not alone.

A leading article in The Economist this week warned that the industry is overinflating prices in the face of company hype and under-educated investors.

"This paper warned about the last internet bubble and the American property bubble long before they burst," the article said.

"Irrational exuberance rarely gives way to rational scepticism quickly. So some bets on start-ups now will pay off. But investors should take a great deal of care when it comes to picking firms to back."