Update: Could The LinkedIn IPO Be A Top In Social Media? How To Trade It

Update: This is an update from an article written earlier in the week with some pricing updates. Today, LinkedIn LNKD opened for trading, and priced the IPO well above the expected range, pricing at $45. Shares are currently trading nearly 90% higher than that, currently around $85 per share. There is obviously tremendous demand for this social networking company, and it now has a valuation of around $8 billion, $5 billion than the original offering amount. Here is the original article in its entirety: LinkedIn Corp is set to go public this week on Thursday, May 19, and many are wondering if the IPO of the fast-growing social networking site could mark a top in social media valuations. The company, which is a social network for professionals and was founded by ex-PayPal executive Reid Hoffman, is valued around $3 billion based on pricing expectations. Renren RENN, considered by many to be the "Chinese Facebook" went public recently, and shares have underperformed drastically since it went public, leading some to think that this is the top in social media. As valuations of companies like Twitter, Groupon, Zynga, and Facebook rise sharply on secondary markets, their notoriety and interest in them has grown almost as fast as the companies' worth. LinkedIn is valued at 12 times sales, which is far higher than Google GOOG or Yahoo YHOO, which are valued at 4 to 5 times sales. "In terms of the potential of how profitable LinkedIn can be, that's where most people feel that its upside potential is a lot more limited than some of the others," said Jay Ritter, a professor of finance at the University of Florida to Reuters. Some have begun to question whether a bubble is firmly in place, and when it will burst. Eric Jackson, managing member at Ironfire Capital said to Reuters, "I think we're far from a bubble bursting, and these kinds of events are just going to be a fuel to help the party continue for a couple more years at least." The company will sell 7.84 million shares, and will price between $32-$35 per share. IPO So how to trade it? In the company's S-1, the company said revenue growth would slow, and that it expects to lose money this year, as hiring and other expenditures ramp up. Seeing as the markets appear to be consolidating here, LinkedIn may not perform as well as other IPO's in the space, and could potentially drop, as investors are worried about growth prospects. If investors feel that LinkedIn's growth will not be what it has been, then shorting shares off the IPO could potentially be a profitable trade. The company will trade on the New York Stock Exchange under “LKND.”