Solutia is a $3.1 billion market cap company. They made it through a spin-off from Monsanto . They filed for bankruptcy, restructured and bounced back.
It’s a company that makes the films in your phones, tablets and windshields—they make "stuff". They have a manufacturing footprint all over. So, as you can imagine, it may sting to see that LinkedIn is worth three times what they are.
CEO Jeffry Quinn said on Worldwide Exchange, "Some valuations are crazy. For a company like ours that makes products that people use every day, it's always frustrating to see these types of valuations for a company that really doesn't produce a product that people use."
"I think that these companies certainly have had a tremendous amount of growth, but there's obviously a lot of promise that has to lie in front of these companies to justify these valuations. And based upon the profit margins that we've seen from LinkedIn and most likely will see from others as their S-1s get filed, these aren't really that significantly different from other businesses," David Garrity, principal at GVA Research said on Worldwide Exchange.
For some investors, the Linkedin's S-1 is reminiscent of the metrics used to evaluate traffic and valuation during the go-go "Pets.com" days.
"People are just basically buying into the hype around the growth. I think that the growth itself over time is going to slow. I don't think that there's a lot here now to substantiate the valuations," Garrity added.
For a slow, steady materials company, Quinn says Solutia uses Linkedin to conduct business and believes the service is here to stay. But, the idea that they only produce connections and communication concerns him.
"It's easy to manage things when you have to be a tough, scrappy company to compete in a global market. But also when millions and millions of dollars of paper wealth are created overnight, it changes a perspective about it," Quinn said.
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