Many wondering if bankers scammed LinkedIn on recent IPO

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.

If true, this would be yet another reason why the bankers are not to be trusted. And again, when the tables are turned they rarely fail to stick it to everyone else. What a missed opportunity TARP and so-called financial reform was to put them back in line.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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