LinkedIn Joins Facebook To Ride The Asset Bubble

It’s not just Facebook, now LinkedIn is looking to cash in on the inflated asset values for social networking sites which have been boosted by Goldman Sachs’ investment in Facebook.

In an SEC filing last week, LinkedIn said it was planning an IPO to raise up to $175 million. LinkedIn turned its first profit last year.

 

LinkedIn is expected to be the first of many social networking sites to jump on the asset bubble now being pumped up for the sector  - excluding the sites of yesteryear – MySpace, Bebo, Friends Re-United etc – which are being spurned by their young customers who have found something they like better.

 

As a famous Rolling Stone article explained, to pump up an asset class and create a bubble valuation for it is a classic strategy of Goldman Sachs.

 

Meanwhile, folks, your super-sizzler favourite asset Facebook is valued at $82.9 billion on secondary exchange SharesPost Inc.

 

The opportunities for speculative investment will now multiply, with every social networking site subject to the hype-tide which raises all ships  - except, of course, those already holed and sinking.

 

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23 Comments

  1. Garry
    February 03, 2011 12:47

    Hay have the guys at ITV recovered from their last great investment (about -150M on friends)?
    maybe we can use these “opertunities” to fund our higher education
    All the students sign up to the network, we IPO and then use the money to pay for the student fees – anyone got the ed sec tel no.?

  2. Mike Bryant
    February 03, 2011 09:01

    ycombinator has been the talk of the valley for years. It works best for software startups as it’s usually far less than $150k invested.
    Although it was intended to get projects in a better shape for first investment, some become good enough to raise a loan and go directly to market. Apparently there was a private meeting of all the VCs there to discuss how to deal with this threat to their pockets but no actions came out of it.
    I’ve often talked about finding a way of setting up this model here and ‘it wouldn’t work here’ is the standard reply. This is possibly tainted by the various government funded Proof of Concept funds which tended to get used by universities as another source of research funds and little actually got to market. The ycombinator model cuts out that sort of project.

  3. David Manners
    February 03, 2011 06:44

    Thanks very much indeed, greg, interesting stuff.

  4. greg
    February 02, 2011 23:21

    The articles gist is that the earlier invester in Facebook (russian Yuri Milner) set up his own fund to compete with established SV Venture Capitalists. The terms appear more favourable on the surface to the Entrepreneurs themselves rather than the VC’s – but the conclusion is only time will tell how well it works.
    Another article on it is here
    http://techcrunch.com/2011/01/28/yuri-milner-sv-angel-offer-every-new-y-combinator-startup-150k/
    His startup incubator which is giving 150K to entrepreneurs is here
    http://ycombinator.com/

  5. David Manners
    February 02, 2011 22:23

    Thanks greg but I’d have to subscribe to read it.

  6. greg
    February 02, 2011 21:56
  7. David Manners
    February 02, 2011 20:40

    Truly excellent, Stoorieft, combines a financey sort of word with a suggestion of faddishness – does the job

  8. Stooriefit
    February 02, 2011 20:20

    “Ephemeral collateral”?

  9. David Manners
    February 02, 2011 17:46

    Very very good AndyRem, i like that

  10. AndyRem
    February 02, 2011 17:08

    “Virtual Landfill”

  11. David Manners
    February 02, 2011 15:17

    When’s an asset not an asset Mike? When it’s valued at $82.9 billion by the secondary markets? Or when it’s a fevered craze in a college dorm? You’re right, I should use a more pejorative term than asset: ‘Heap of manure’? ‘Over-blown fantasy’? ‘Passing whim’? ‘Wankers’ Wonder’? I don’t know – perhaps you can think of a better term than me.

  12. Mike Bryant
    February 02, 2011 14:20

    David – surely your use of the term ‘asset class’ implies some form of assets. Call me old-fashioned but where is there value in a very long list of teenagers even if they can and do sponge off their parents. Apart from a new phone every year, the model of which is predecided on religious grounds, this section of society isn’t renowned for having ‘cash to splash’ that will be influeced by advertising.

  13. David Manners
    February 02, 2011 09:14

    No Capt Sam, you’re not being cynical – just watch every site that has any claim to call itself a social networking site to look to raise money in the coming months. GS is pumping up a whole asset class – not just FB.

  14. Capt Sam
    February 02, 2011 05:36

    I suspect some old fart at GS has seen the FB movie and as they say, there’s no such thing as bad publicity, has decided to use the profile generated by Hollywood to nail 000′s of non-savy investors to the wall or am I just cynical? surely the timing is not a coincidence?

  15. Garry
    February 01, 2011 12:15

    Has any-one seen any research as to why users of social networks “jump ship”? What % change, etc.
    I would be interested to read any information
    Suspect it might be that they don’t want all the big blue corporate stuff of ads and offers.
    They just want to place messages etc and be done- gone.
    Also there might be a Social trend early adopter type bringing each new network site up into the publics notice – what drives them?
    I have not seen any research or articles on this so I guess that either the Guys in the Stocks and shares market Analysis are holding the answers close to their chests in the hope to make a few bucks or they don’t know – have not thought it through.

  16. David Manners
    January 31, 2011 19:36

    Ah Yes, greg, I see what you mean. It’s a very intriguing idea. I suppose these sites allow you to make a start-up pitch to the whole world and try to attract investors without the need to go through a VC or a bank or any conventional funding source. As to these bonkers GS bankers – I think you may have another good point because we never see these people on the TV. We see top banking managment – but never an actual ‘investment banker’. Could this be because the public would be so appalled by one of these creatures that top banking management won’t let them appear in public?

  17. greg
    January 31, 2011 19:26

    You’re right of course David, I was just speculating whether some shift may also be occuring in the way companies approach VC money and whether we may be seeing some of that shift in the guise of Sharespost and SecondMarket. I think its quite possible that all these people are psychopaths so there is never enough money. Being a psychopath is probably a job requirement for a Goldman partner. If only they had been personally on the hook for losses during the crisis I’m sure quite a few would have committed hurry-curry.

  18. David Manners
    January 31, 2011 19:02

    Neither LinkedIn nor Facebook need money, greg, this is just an opportunity for Goldman Sachs to make a massive speculative gain on Facebook by pumping up an asset class which has a particularly erratic history. What would Zuckerberg, what would anyone, want with $50 billion or $100 billion? It’s certainly not needed as working capital to keep a social networking site running!

  19. Mike Bryant
    January 31, 2011 19:01

    I went through my pension schemes and according to their published rules, this would not be an acceptable investment until it is floated on an approved exchange. I know you said pension funds are in that VC grouping but I fail to see how they can invest. If you find a way please let me know and I’ll get my MP to raise it in Parliament as pension companies are one of his pet topics :-)

  20. greg
    January 31, 2011 18:40

    … Is what facebook is doing now an alternative to having to deal with Venture Capitalists? Zuckerberg has kept the CEO’s job when many others who needed to raise money have not. Are other sites like linkedIn and Twitter who maybe are needing to raise capital trying to avoid venture capital requirements (and those people) by trying to raise money on secondary markets? Can they get to an IPO without having to deal with another round of VC?

  21. David Manners
    January 31, 2011 15:49

    Amen, Dr Bob

  22. Dr Bob
    January 31, 2011 15:11

    I’m just praying that my pension scheme managers don’t buy into them

  23. Anonymous
    January 31, 2011 14:10

    My version of your last sentence: ..except, of course, those already way off in the air, that they can only fall.. gravity, as they say, sucks.

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