DealBook: Higher I.P.O. Price Values LinkedIn at $4.3 Billion

David Paul Morris/Bloomberg NewsReid Hoffman, LinkedIn’s chairman, whose stake could be worth nearly $853 million when the company goes public.

7:03 p.m. | Updated

A few months ago, LinkedIn’s market debut looked to be relatively modest. Its value on a secondary exchange had stagnated at roughly $2.5 billion.

But LinkedIn — the professional social network that is expected to begin trading this week on the New York Stock Exchange — is defying expectations. On Tuesday, the company said in a regulatory filing that it could raise as much as than $405 million. The offering, which is priced at $42 to $45 a share, values the site at $4.3 billion.

That is a significant improvement in a short time, an increase of more than 30 percent from previous expectations. In early May, the company originally set its range at $32 to $35 a share, or roughly $3 billion. Private shares of the social network recently traded at an implied valuation of $2.5 billion on SharesPost, a secondary market.

“It’s a big surprise,” said Rory Maher, an analyst with Hudson Square Research. “Thirty percent indicates that people are dying to get into this.”

The networking site, which has more than 100 million members in more than 200 counties, said it planned to sell more than 7.84 million shares. The underwriters of the offering have the option to sell an additional 1.176 million shares, depending on investor appetite.

An initial offering allows entrepreneurs and institutional investors a chance to cash out. LinkedIn’s chairman, Reid Hoffman, and its chief executive, Jeffrey Weiner, are both selling a small number of shares and will net an estimated $5.2 million each, assuming the shares price at $45. At that price, his entire stake is worth $852.8 million. Goldman Sachs is expected to be the largest seller, offering the firm’s entire stake of 871,840 shares.

LinkedIn’s improving fortunes signal the swelling demand for the Web’s most promising social media start-ups. Both Groupon and Facebook are expected to go public within the next 12 months. Groupon is said to be talking to bankers about a valuation north of $20 billion. Facebook’s last major financing round, a $1.5 billion investment led by Goldman Sachs, valued the company at $50 billion.

Although a lot of the exuberance around Facebook and Groupon has been widely discussed, a strong showing for LinkedIn on its market debut on Thursday would be a positive harbinger for Internet I.P.O.’s. According to a recent report by SecondMarket, an exchange for private shares, investors expressed the most interest in Facebook, followed by Twitter, Groupon and LinkedIn.

“It’s a good litmus test,” Mr. Maher said. “This is a confirmation that investor demand is really strong. A combination of heavy demand and the lack of supply is really driving this.”

Of the social media giants, Groupon is expected to be next on deck. The group buying site is preparing to file a prospectus within the next two weeks, according to two people close to the company who were not authorized to speak because details of the offering were private.

It remains to be seen how well the shares of Internet start-ups will perform in the public markets. The Chinese social networking site Renren priced its offering on the New York Stock Exchange at $14. While its shares closed at $18 on the first day of trading on May 4, the stock closed Tuesday at $12.73.

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