Was LinkedIn Scammed?
The underwriters also have a responsibility to all involved not to over price the ipo to take advantage of transient demand. If they do, and the stock ends up under water within a few days to months they run a serious risk of pissing off both their investing clients and the newly public company. Opening down or trading below what the stock priced at in the short term has a strong stigma attached to it and can make retail and institutional investors think there is something systemically wrong with the company regardless of the fundamentals.<p>There was an editorial in the WSJ on friday that strongly suggested the price action in LNKD has to do with the current easy credit environment driving money into riskier assets. I agree this seems likely. Certainly it seems difficult to justify the valuation on any traditional metric. If when pricing the ipo Morgan also felt that any frothy demand was based more on the easing environment than real interest in LNKD as a company, perhaps they were right to hold the pricing a bit more conservative than the market was suggesting.<p>After all, they already had increased it by almost 33%, and the current QE program is scheduled to shut down in June. Many smart people appear to be betting on interest rates climbing after the program ends, that may take enough money out of the market to cause someone like LNKD to correct.<p>Another thing to keep in mind is that LNKD offered a relatively small amount of stock as compared to many offerings. This kept supply low and could have contributed to the large pop, but also means that they probably have plenty available for a potential secondary offering, which could allow them to profit from these very price moves down the line,