Trader Scott Sweet on LinkedIn: I’m Buying as Much as I Can

Earlier this afternoon, Scott Sweet, managing director of the research firm IPOboutique.com, told me that he’d already received more than 30 calls today. Tomorrow, he says, “it will be double that number – at least.”

Sweet finds himself in great demand as observers contemplate the imminent IPO of LinkedIn, which raised its expected price range this morning by $10, a move not seen since 2000, when three companies did precisely the same thing: Palm (acquired last year by HP for $1.2 billion), ArrowPoint Communications (acquired months later by Cisco for $5.7  billion) and contract-management software maker Selectica.

LinkedIn originally intended to sell 7.84 million shares at between $32 and $35 apiece; the company’s range is now set at between $42 and $45.

I asked Sweet if he thought the range might be a little too rich.

At LinkedIn’s new price range, it will be valued at up to $4.25 billion at the high end. That’s about 250 times last year’s earnings of $15.4 million. What’s Morgan Stanley thinking here?

This is definitely a watershed IPO, in that if this doesn’t work, Groupon, Twitter, Zynga, and the granddaddy of them all, Facebook, will have a problem getting top valuations. It will also mean that the underwriters who priced the deal will likely get bounced out the door if they try to get the deals to underwrite [the aforementioned]. And I hardly think Morgan Stanley would like to be the one to misprice LinkedIn.

But given LinkedIn’s sales, it wouldn’t be valued at $4.25 billion if it weren’t a “social network.” Is that cause for concern?

It’s true that you wouldn’t value an industrial company that high, but LinkedIn is an extremely strong niche story. It’s the first social networking company to go public. There’s a lot of pent-up demand for it. They still do have nearly 100 million users and are in 200 countries and they have a nice business plan that they have in place to enhance their product offerings.

Are you buying at $45?

I’m in for as many shares as I can get. I’m a trader, so I certainly see a short-term trade. Long-term? I’m not long-term oriented, so I really don’t look at any IPO from that angle.

You are paying a premium price for a phenomenon that has already changed the way business is done, and will be done. If you think [it’s rich], wait till Facebook comes. There will be pandemonium.