The initial public offering (IPO) of LinkedIn on the New York Stock Exchange was a remarkable event in many ways.
Priced originally at US$45 a share in the pre-trade offering, the stock moved quickly up during its first day of trading to reach a high point of US$121.97.
It closed just under $100 that day at US$ 94.25.
Originally valued at an already rich US$3 billion, a share price of $100 suggests a value of US$10 billion - quite impressive for a social network with a not terribly active member base.
The IPO of LinkedIn is a good illustration of why some market observers have argued a new dotcom bubble is brewing.
Google currently trades at US$518 a share, which implies a dazzling market value of US$167 billion.
Yet looking at the company's fundamentals and comparing those with LinkedIn's makes Google look like a budget firm.
Google's valuation means it trades at a price-to-earnings (P/E) ratio of 20. LinkedIn's P/E ratio currently lies at 1364.
And then I haven't even mentioned Apple, which has a market capitalisation of US$306 billion, or Facebook, whose value is estimated at anywhere between US$50 billion to US$150 billion.
Those who argue that it is different this time point to the high numbers of online connections per country, ridiculous Internet speeds and the presence of real revenues, as opposed to the promised revenues during the 1990s dotcom bubble.
But anyone with commonsense would experience a sense of déjà vu and realise today's multiples in the social media sector are unsustainable.
Pivot Point Advisors partner Martin Gremm calculated in an online post on a Forbes blog that if LinkedIn managed to grow its earnings by 50 per cent every year for the next decade, investors would still need to wait more than a decade to see any return on their investment.
Now that is taking a seriously long-term perspective, but it is more likely these investors are just participating in a mass hysteria.
The absence of technology stocks on the Australian market has often been mentioned as a prime reason to allocate more to international equities, but perhaps now is the time to be more selective on what technology stocks you really want to own.
