New York Magazine writes that LinkedIn's IPO may be a few days old, but the tech press can't stop arguing over whether the company's Wall Street underwriters, like Morgan Stanley and Bank of America, purposefully underpriced its shares, robbing LinkedIn of $200 million in lost proceeds. The charges leveled against Wall Street banks are as follows: LinkedIn was priced at $45 a share, but more than doubled on the first day of trading. The difference between the offering price and opening price is referred to as an "IPO's pop."
While some argue that a big pop is a sign of a successful IPO, others, like the New York Times Joe Nocera and Business Insider's Henry Blodget say the mis-pricing ended up benefiting the banks' big investor clients — "rich mutual fund firms like Fidelity and hedge funds like SAC Capital" who could buy the stock cheaply and watch it climb.
According to Nocera and Blodget, Wall Street banks are paid handsomely to know things like whether a company's shares are going to double in price. But Reuters' Felix Salmon has a different take. Salmon argues that although banks do deliberately underprice IPOs, we need only look at the vampire squid's behavior to know that this was more of a foible than a con…
Read more at:
http://nymag.com/daily/intel/2011/05/goldman_sachs_greed_proves_wal.html
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