• by Erik Sass , Staff Writer @eriksass1, June 20, 2011

Naysayers and Cassandras of all stripes (including myself) have been wringing our hands over an alleged bubble in social media company valuations over the last year. While much of this anxiety is based on simple gut feelings, there's reason to think that some private investors and venture capitalists have fallen prey to irrational exuberance. But judging by the first social media IPOs, that doesn't seem to be happening in the stock market (at least so far).

LinkedIn gave every appearance of being a bubble property in the first couple days of trading in mid-May, but this early enthusiasm subsided quickly: after soaring from $45 to over $122.70 on the first day of trading a month ago, the price settled to $94.25 at the end of the first day, and has steadily declined ever since, to its current level of about $64. That's still 42% above the IPO price, of course, which is a respectable premium -- but there's also no way to know if the price will stabilize there or continue dropping.

Pandora's IPO generated a similar amount of interest last week, but this enthusiasm appeared to be even shorter-lived. After increasing from $16 to $23.75 on the first day of trading, Pandora's stock price fell below $13 by the end of last week, before slowly edging up to about $14.30 in current trading. That's 10.6% below its IPO price, which is hard to interpret as evidence a "bubble" dynamic.

Although it's not an IPO, Microsoft's acquisition of Skype on May 10 also got a lukewarm reception from investors, as Microsoft's stock price declined from $25.87 the day before the announcement to a low $23.71 last week (before rallying to $24.51 currently).

Of course, these are just three social media companies out of dozens which may eventually choose to go public -- and their business models and IPO strategies may differ significantly from those which follow. On that note it will be interesting to see how upcoming IPOs from Groupon and Zynga pan out. But the LinkedIn and Pandora IPOs seem to indicate that for the time being, at least, the stock market is keeping its head about social media.