Poor IPO After-Market Activity Bodes Ill for LinkedIn

May.12.11 | About: LinkedIn (LNKD)

Yesterday, four IPOs started trading. There were 3 losers and the fourth closed up only 1.3%. The implications for LinkedIn (NYSE:LNKD) are not good.

CONCLUSION

Based on the IPO after-market activity for Wednesday May 11, it appears LinkedIn (LNKD) might be in for tough sledding in the after-market next week.

At the price range mid-point of $33.50 LNKD would sell for almost 377 times earnings for the year ended December 2010. LNKD's IPO is scheduled for Thursday May 19, 2011.

THREE LOSERS, ONE SMALL WINNER

The biggest loser on Wednesday was Friend Finder (FFN), which tanked 27% before closing down 21.5%. FFN priced at the range bottom of $10. In our IPO preview we advised readers to ‘stay away from this IPO

RLJ Lodging Trust (NYSE:RLJ), down 7% during the day, closed down 1.3%, after pricing below range at $18. The projected payout at the price range mid-point of $20 was only 3%. Other hotel REITs pay more. Read the RLJ IPO preview here.

Kosmos Energy (NYSE:KOS) is the only IPO that traded up in the after-market Wednesday, with an intra-day gain of 8% before closing up 1.3%. KOS priced at the range top of $18. Read the KOS IPO preview here

CHINESE INTERNET IPOs TRADE DOWN

The Chinese dating site Jiayuan.com (NASDAQ:DATE) priced late in the day Wednesady at the price range mid-point of $11 and started trading at 2:45 pm eastern time. DATE traded down 11% before closing down 4.4%. It was the IPO pick of the week based on strong sequential quarterly growth.

Even though DATE has good sequential quarterly growth, it’s caught in a downdraft of Chinese Internet stocks, with a relatively high P/E of 57 times annualized earnings for the December 2010 quarter.

Except for Youku (NYSE:YOKU), Chinese Internet stocks are all down relative to their first day trading prices, going back to ChinaCache (NASDAQ:CCIH) which priced its IPO September 30, 2010. CCIH is down 41% in the after-market.

Last week’s social networking star Renren (NYSE:RENN) made a quick IPO round trip. During the first trading day, Wednesday May 4, VNET touched $24 up 71% from the IPO price of $14. RENN closed Wednesday May 11 at $13.49.

And 21Vianet (NASDAQ:VNET) closed Wednesday May 11 at $14.93, also below its IPO which was $15. VNET peaked at $22.33, up 49% during its first trading day April 20, 2011. SInce then VNET has traded as low as $13.12.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.