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LinkedIn IPO scam by Morgan Stanley and Merrill Lynch?

467835732
(edited 1 year ago)
The excuse given for slight underpricing (IPO discount of 3-10%) is usually something along the lines of "we need to keep institutional investors interested" because it is a special situation and about the only time when a basically unknown company is issuing that large a block of shares to the public.

For an IPO like LinkedIn... well not much excuse for not gauging the demand, but keep in mind that pre-IPO people called the valuation excessive - very hard to come up with a value for a company with little/ no profits, no good comparables and with a prominent M&A deal in the space being done at a much lower valuation (p/s, p/user) just prior. Also not sure what the price hike was driven by - if it had been this apparent then surely books must have been covered multiple times at the high end so why not increase the range? Wouldn't have gone as high as this but still. In their pitches, banks do NOT want to show how the price of their IPOs falls after issue though - original shareholders don't really like this either because they keep a lot of shares for themselves.

Anyway, not much excuse for them. Unfortunately though, it happens a lot.
Reply 2
Avatar for pedantic
pedantic
3
The bankers have to be able to rationalise their valuation, whilst the market can put an irrational valuation on a company.

This is the main cause of this discrepancy.
Reply 3
Avatar for epc
epc
That is the first thing i thought of when i read it closed on $94.25, but then i look at the valuation and even $45 seems to genorous, if Google traded at the same level price to earnings, it would be valued at $1.2 trillion!

If this is not bubble material then i don't know what is.
(edited 12 years ago)
Linkedin got ridiculously overpriced

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