NEW YORK: For Reid Hoffman , the chairman of LinkedIn, it took less than 30 minutes to earn himself an extra $200 million. With the hours ticking down to his company's stock market debut, Hoffman dialed into a conference call from San Francisco's Ritz-Carlton hotel as his chief executive, Jeff Weiner , and a team of bankers raced up from Silicon Valley in a black SUV to meet with potential investors.
Demand for shares was intense, and they quickly decided to raise the offering price by $10, to around $45, lifting the value of Hoffman's stake to more than $850 million. When trading began on May 19, LinkedIn did not open at $45. Or $55. Or $65. Instead, the first shares were snapped up for $83 each and soon soared past $100, showering a string of players with riches and signaling a gold rush that has not been seen since the giddy days of the tech frenzy a decade ago. Now there are signs that a new technology bubble is inflating, this time centered on the narrow niche of social networking. Other tech offerings, like that of the Internet radio service Pandora last week, have struggled, and analysts have warned that overly optimistic investors could once again suffer huge losses.
That enthusiasm was on full display in the blockbuster debut of LinkedIn, which provides a window into how a small group - bankers and lawyers, employees who get in on the ground floor, early investors - is taking a hefty cut at each twist in the road from Silicon Valley startup to Wall Street success story. "The LinkedIn IPO will be used very powerfully over the next year as these companies go public and bankers deal with Silicon Valley," said Peter Thiel, the president of Clarium Capital in San Francisco and an early investor in PayPal, LinkedIn and Facebook. ``It sets things up for the other big deals.`` The sharp run-up after the initial public offering set off a fierce debate among observers about whether the bankers had mispriced it and left billions on the table for their clients to pocket. But the pent-up demand for what was perceived as a hot technology stock set the stage for easy money to be made almost regardless of the offering price.
Naturally, Wall Street is enjoying a windfall. Technology IPOs have generated nearly $330 million this year in fees for the biggest banks and brokerages, nearly 10 times the haul for the same period last year, and the most since 2000. Besides the $28.4 million in fees for LinkedIn's underwriting team, which was led by Morgan Stanley, Bank of America and JPMorgan Chase, there were also a few slices reserved for specialists like lawyers and accountants. Wilson Sonsini, the most powerful law firm in Silicon Valley, collected $1.5 million, while the accounting firm Deloitte & Touche earned $1.35 million.
Hoffman founded LinkedIn in March 2003 after making a fortune as an executive at PayPal, but even as LinkedIn grew and other employees and private backers got stakes, Hoffman retained 21.2 percent, giving him more than 19 million shares when it went public. He has kept nearly of all them, so his $858 million fortune - it was $667 million before the last-minute price hike - remains mostly on paper. Weiner arrived more recently, in late 2008, after working at Yahoo and as an adviser to venture capital firms, but his welcome package included the right to buy 3.5 million shares at just $2.32.
