LinkedIn shares fall 5pc raising fears firm’s value is over-inflated

LINKEDIN slumped almost 10 per cent during trading yesterday before closing five per cent lower at $88.30, sparking fears the initial rush on its shares may have over-inflated the firm’s value.

The low-point of $84 a share was still far higher than its IPO price of $45 a share but a big slip from the dizzying heights of $123.

The pressure comes ahead of the deadline this afternoon when LinkedIn shares “settle”, opening up the prospect of short sellers betting against the firm.

Many investors seem to have decided to lock in the gains they have already made. Shares in Chinese search engine Renren also rocketed after its IPO but then fell back over the next week.

LinkedIn’s meteoric rise fuelled speculation the tech sector is heading for a second dot.com bubble. At its high point the business social network was trading at more than 700 times its 2010 earnings of $15.4m and 45 times its revenues of $243m. The Silicon Valley-based firm had already upgraded its listing price by 30 per cent in the days running up to its IPO.

Rob Enderle, analyst at Enderle Group, said: “At least it’s not collapsing. But if it comes down a lot it’ll make it much tougher for Facebook and Twitter to come out high.”