LinkedIn the 'most expensive stock'?

LinkedIn (LNKD) priced its initial public offering at $45 a share Wednesday, only to watch shares pop to more than $108 Thursday morning -- a 140% increase.

The outrageous jump in price says a lot. LinkedIn's bankers grossly underpriced the deal, obviously. This could signal an emerging bubble for Facebook, Groupon and other social-networking companies. And LinkedIn is now ridiculously overvalued.

Even at the IPO price of $45, SmartMoney called LinkedIn the most expensive stock in America. The company's profits are minuscule -- $15.6 million in the past four quarters -- giving it a price-to-earnings ratio of about 275, Jack Hough reports.

Post continues after this video analyzing LinkedIn's craziness today:
Wait a minute, a $9 billion market value for a company with just $15.6 million in profit? Now we've seen everything.

At any rate, LinkedIn's price-to-sales ratio is 14.7, based on the $292 million in sales LinkedIn booked over the past four quarters, Hough writes. Only one company has a higher price-to-sales ratio, and that's Vertex Pharmaceuticals (VRTX).

Hough dismisses Vertex as an anomaly and names LinkedIn America's most expensive stock.

But let's double the valuation Hough used, since LinkedIn's share price blossomed in morning trading to at least twice the $45 price on which Hough based his calculations. At a $9 billion valuation, LinkedIn's price-to-sales ratio rockets to 30.8. Compare that with Apple (AAPL), at four times sales, and Google (GOOG), at five times sales.

And LinkedIn's new price-to-earnings ratio shoots to about 575. Dizzying numbers. But LinkedIn's chief executive seemed to shrug it off Thursday. "Speaking for myself, personally I'm not even thinking twice about where the price is today and leaving money on the table or even anything remotely along those lines," Jeff Weiner told Reuters. The stock, he added, "will take care of itself."

One company does not make a bubble, and reading too much into LinkedIn's tea leaves to speculate on Facebook or Groupon is dangerous. Weiner hesitated to compare today's social-networking companies with any of those in the dot-com bubble of the late 1990s, saying that the fundamental values are different.

Another decidedly less-flashy stock also debuted Thursday. Swiss commodity trader Glencore rose after a $10 billion initial public offering in London. Glencore's IPO priced at $8.60 a share, in the middle of its expected range, giving the company about a $60 billion market value. Shares rose about 2% from the opening price.

So what are people saying about LinkedIn's performance today? One common thread seems to be that LinkedIn got screwed by its Wall Street bankers, JPMorgan (JPM), Bank of America (BAC) and Morgan Stanley (MS). Those underwriters were the ones who recommended the $45 IPO price.

"A 100% rise is evidence that LinkedIn’s shares were wildly, almost fraudulently, underpriced," writes John Carney at CNBC. "The bankers either had no clue about the price people are willing to pay for the shares -- or they decided to grant their best institutional investment clients a bonanza at the expense of LinkedIn."

SmartMoney's Jack Hough says investors should be cautious about LinkedIn. Most IPOs underperform in their first year, he writes, and an IPO in general might signal that insiders don't think the company's value is likely to go much higher. Finally, LinkedIn's share structure is set up so that common shareholders won't control voting.

Finally, Bloomberg's Paul Kedrosky says we'll see a big rush to get other social-networking companies out the IPO door. "Every venture investor I know has changed his plans with respect to taking social-media portfolio companies public," Kedrosky writes. "Everyone is thinking, 'Let's get everything we have out, like, tomorrow.'"