In mid-May, LinkedIn launched an IPO in the United States. By the end of the first day of trading, the share price had doubled, leaving pundits to believe that the tech market is being revitalised. Could this have implications for us in the region?
On 19 May, LinkedIn, the popular professional networking site, launched an Initial Public Offer (IPO) on the New York Stock Exchange (NYSE) to sell 7.8 million shares. Prior to the launch, the company had priced it shares at USD 45.00 per share. By the end of the first day of trading, the share price had jumped to USD 94.00 per share, and the company was worth USD 8.9 billion.
The LinkedIn IPO has been the biggest opening of a tech company since Google‘s in 2004. At the end of the first day of trading, having offered 19.6 million shares, Google was valued at over USD 23 billion. However, LinkedIn is also the first social networking site to go public (in the US) and the first based on web 2.0 to be worth billions of dollars.
Even at the time of the Google IPO, there was a sense that the tech market was still plagued by the fallout from the dotcom bubble of 1995–2000. During that time, stock prices were spectacularly high, and investors were confident that web-based ventures would be profitable, regardless what the outcomes of standard business analysis might indicate. In a nutshell, tech businesses were seen as excellent investments. However, with every boom, there is a bust. The dotcom collapse was driven by among other things, unfettered spending, untenable business models, and the slowing down of the US economy due to increasing interest rates.
Thanks to the collapse of the dotcom bubble, investors have been wary of tech stocks. Although some tech businesses might be well-known and widely used, e.g. Amazon and Google, they often do not report a profit prior to their IPOs. As a result, their IPO launch can be less than impressive. However, although LinkedIn is yet to be profitable, its IPO is being seen by experts as heralding the revitalisation of the tech market, especially with respect to social media and Internet companies. Within the coming year, a number of other companies are expected to launch IPOs, such as Facebook, Groupon, Pandora, Kayak and Zynga. Pundits are optimistic that the LinkedIn success is just the first of many to come.
However, what could LinkedIn’s success mean for tech markets in the region?
Although we have nowhere as large or as vibrant stock markets as the US, there could be some positive effects on tech businesses, especially start-ups, in the Caribbean.
1. A shot in the arm for all techies and tech businesses. For those who have dedicated themselves to success in the IT/ICT field across the Caribbean, LinkedIn’s lucrative first day on the NYSE should be seen as a validation of the commitment and sacrifices that have been made. Although none of us might own a single share in LinkedIn, we can all be encouraged by what it has achieved.
2.2. Potential for more investment. One of the biggest issues that most start-ups experience is the need for capital, either to allow the business to continue operating, or to facilitate its expansion. More
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Michele Marius is an ICT/Telecoms Consultant. She has decade-plus experience in telecommunications ICT policy, regulation. contracting and consulting, which has been developed in the Caribbean, Southeast Asia and the South Pacific.
