Many wondering if bankers scammed LinkedIn on recent IPO

[deminks]

http://www.americablog.com/2011/05/many-wondering-if-bankers-scammed.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Americablog+%28AMERICAblog%29&utm_content=Google+Reader

Whether or not you buy into the high values of social media, you probably noticed the stunning LinkedIn IPO last week. It opened at an expensive value and doubled. Now, many are asking questions about whether this was Wall Street's latest ripoff. Atlantic Wire:

When social network LinkedIn's stock skyrocketed after its IPO debut, the financial community reeled at the fact that LinkedIn's underwriters, Bank of America Merrill Lynch and Morgan Stanley, had set the price so low. As Henry Blodget at Business Insider indicated, they set the price at $45 a share when they could have asked for $90, and thus effectively cheated LinkedIn out of over $130 million.

Joe Nocera furthers this claim against LinkedIn's underwriters at The New York Times, noting that while there is "nothing wrong with a small 'pop' in the aftermath of an IPO," such a tremendous rise in stock price indicates that "in reality, LinkedIn was scammed by its bankers."

The fact that the stock more than doubled on its first day of trading — something the investment bankers, with their fingers on the pulse of the market, absolutely must have known would happen — means that hundreds of millions of additional dollars that should have gone to LinkedIn wound up in the hands of investors that Morgan Stanley and Merrill Lynch wanted to do favors for. Most of those investors, I guarantee, sold the stock during the morning run-up. It’s the easiest money you can make on Wall Street.

(end snip)

[DeSwiss]

1. Whenever and wherever bankers are involved, crimes will be committed. - K&R n/t

[phasma ex machina]

2. +1 On balance, treating banksters as guilty until proven innocent works best. nt

[bigbrother05]

3. Exactly what they did in the dot com era

All the big banksters cut their friends in on the IPOs and doubled their money in the first 24/48 hours. Meant they got extremely rich and shorted the startup companies in much needed capital that could have allowed many to have had a much better chance of making a go of things. The banksters all kept the profits and the public, the small guys that paid the "real" value, actually bought into a business that was already financially crippled.

[CoffeeCat]

9. You're right about that...

Those who got in on those IPOs were the ones who made serious bank. However, it
was hard has hell to get in on the IPOs. It's like they shut out the little investor
and only allowed insiders to get in on those IPOs.

I was working for a high-tech company during the tech boom and we tried to get in
on the Google IPO. I knew one of the principals working at JP Morgan, who was
working on the Google IPO. He couldn't even get me in!

It's a game. Unfortunately, the millionaires and billionaires are the ones who get
the great deals. We're shut out!

And you're right--then they short these stocks, knowing damn well that those high
valuations are unjustified and a load of hot air!

[marmar]

4. "many are asking questions about whether this was Wall Street's latest ripoff"

Pope. Catholic. Bear. Woods.

[Fumesucker]

5. For some reason I keep thinking of fjords..

And wistful parrots.

[Lucky Luciano]

6. If they set the price at $90, then they would have

been setting themselves up for lawsuits for propping up a bubbly sector.

The trouble is that only 10% of the company was offered for sale. Only 7.84 million shares. 30 million shares traded on ipo day. Tells you who was involved. Makes for a lot of volatility.

[JackRiddler]

7. Without a doubt. They always do this given the opportunity. But I have an important question...

What is a "LinkedIn"? (Seriously, I don't know.) What's its likely stock price in two years?

[CoffeeCat]

8. Another bubble? They need bubbles right now...

...and frankly, I don't understand the astronomical valuations on these social-media
stocks. How does LinkedIn make money? They can have advertisers, but seriously--this
is not a company like Microsoft or Hewlett Packard--which actually produces something.

I know...these are very cool websites and they are being adopted and used by large
numbers of people. I just don't see the value or where these companies would make
profits large enough to justify such high stock prices.

I mentioned Microsoft and HP. Those companies are part of the tech bubble, as was
a high-tech company where I worked during the tech peak. Many, many reputable, amazing
companies were producing incredibly innovative products, software and web sites that
changed how we do business (Ebay, etc.). Those were substantial companies with real
products and revenue streams that made sense.

And look how that bubble burst!

I'm sorry, but I see a load of hot air and insiders attempting to inflate a load of hot
air--in order to generate another bubble from which they'll make piles of cash. As
much as I love, love, love social media (and use it regularly), I can't buy into this.

[canetoad]

10. I've read several articles lately

that suggest we are in the second dotcom bubble and the patsies are just starting to buy in.