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... and remember guys, the stock price is just what the public is willing to pay for it, and is not directly bound by any fundamentals. It's not LinkedIn's fault that their stock is overvalued.
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This is nothing more than a legalized pyramid scheme. The valuation of LinkedIn has nothing whatsoever to do with the business, its performance, future potential or current assets. It has everything to do with demand for its stock being high. At some point, the fad will die and a whole host of small time investors will lose their shirts (or houses, life savings, retirement funds, what have you). Like all pyramids, if…
News flash: every company's stock value is based on demand for its stock. This is how the price for everything is set. Maybe when we discover true stock-picking clairvoyance this will change and every stock's price will be based on its true future potential, but I wouldn't hold my breath waiting for this to happen anytime soon.
I don't have an issue with demand setting the price; I have an issue with that demand being justified by linking it back to the potential performance of the company in such a way that anyone with half a brain can seen is bordering on the ludicrous.
If the problem was limited to investors that were prepared to take risks and pay for their own loses that would be one thing. The issue I have is that when these things do come crashing down, it seems to hurt everyone but wall street.
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The price is set based on market analysis. That's what the company thought they could get for it. The transaction requires willing participants.
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How many people have the ability to pump up a stock several hundred million dollars? These are most likely hedge funds investing.
Read "The Wolf on Wallstreet." Don't know if it's still happening that way, but the author made it sound like "pump and dump" was (is?) a pretty common game.
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>>*"they just raised $660 million dollars out of the gate in this IPO" No, that's not how it works. LinkedIn priced their IPO at $45/share, meaning they raised $352.8 million. The share price right now has no impact on how much money they raised.
... and remember guys, the stock price is just what the public is willing to pay for it, and is not directly bound by any fundamentals. It's not LinkedIn's fault that their stock is overvalued.
LinkedIn made $15 million dollars last year, and they just raised $660 million dollars out of the gate in this IPO. And, this IPO values LinkedIn at somewhere close to 6.5 billion dollars. A valuation of 6.5 billion dollars on $15 million net income. Let that sink in.
LinkedIn is clearly focused on long term gains over short term profits.
edit: wrong multiple
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That would prevent insiders and common shareholders from selling their shares, but it would in no way prevent an investment bank from unloading their shares through some sort of intermediary.
you mean the underwriters of the IPO are not subject to a lockup period? that seems unusual, but I'd believe it I guess.
Everything outside of that is subject to lockout periods (and in the case of executives they are also vesting on new stock)
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Not necessarily, since the $45 price was at the top of the range and the issue had already been repriced. We won't know whether the $45 price was optimal or not for a while -- it may seem expensive in 90 days when the price settles down.
But if the public is buying the stock at the $80 range minutes after it opens, isn't that enough to say that the initial offer was lower than what it could be? I don't think you need to know what price the stock is trading at three months from now in order to judge the initial sale value.
If LinkedIn wants to capture some of the value from the multiple they're seeing today, they can simply sell (or issue) more stock. Doubling or tripling your IPO price is not a tragedy by anyone's standards.
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News flash: every company's stock value is based on demand for its stock. This is how the price for everything is set. Maybe when we discover true stock-picking clairvoyance this will change and every stock's price will be based on its true future potential, but I wouldn't hold my breath waiting for this to happen anytime soon.
The demand however is based on "expert analysis" that suggests that LinkedIn is worth 4 billion dollars. I don't have an issue with demand setting the price; I have an issue with that demand being justified by linking it back to the potential performance of the company in such a way that anyone with half a brain can seen is bordering on the ludicrous. If the problem was limited to investors that were prepared to take…
That is ludicrous