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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 raise
by portman 15y ago
>>*"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.
- joezydeco 15y agoHow much of that goes to crystal trophies and high-fiving brokers that made the deal happen?
- sanswork 15y agoThey get a chunk of the other 300m.
- joezydeco 15y agoA recurring chunk, you mean. =)
- joezydeco 15y agoActually it looks like more a chunk: "By underpricing the stock, Morgan and BOFA gave their best institutional clients a gift of at least $175 million" http://www.businessinsider.com/linked-in-ipo-2011-5-b http://www.businessinsider.com/linked-in-ipo-2011-5-b
- lefstathiou 15y ago7% of the total IPO issuance goes to the bankers. This number is consistent across the street. Once upon a time, anti-collusion investigations were threatened because there was no explanation for why every major bank charges exactly 7%
- digikata 15y agoI've often thought that there is no need for collusion if you can exchange minimal information over public, legal channels and know how to work a strategy that assumes a modified prisoners dilemma. You can often see oil prices or airline tickets operating that way. E.g when one airline raises prices, then sees that no-one is following the rise, after which the price comes back down. Or everyone else is ready to raise prices and ticket prices go up.
- khafra 15y agoYup; if judges presiding over anti-trust suits had read Thomas Schelling's book The Strategy of Conflict, there would be many more broken-up oligopolies than there are now.
- sabat 15y agoGood point, although the original point still stands: $352.8 million on last year's $15 million. Of course, stock price is a prediction of the future, not necessarily a comment on the past.
- deleted 15y ago[deleted]
- UncleOxidant 15y agoThey left a lot of money on the table.
- kristianp 15y agoThis forbes blog suggests an auction would have been fairer, and I strongly agree. Institutional investors who got in on the IPO are just printing money, whereas a google-style auction would have given more of that money to the owners. http://blogs.forbes.com/greatspeculations/2011/05/19/linkedins-1999-style-ipo-rekindles-questions-about-leaving-money-on-the-table/ http://blogs.forbes.com/greatspeculations/2011/05/19/linkedi...
- jeffreymcmanus 15y agoNot 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.
- brown9-2 15y agoBut 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.
- jeffreymcmanus 15y agoThat really doesn't make any sense. As anyone who knows the stock market will tell you, if you can guess the price of a stock before the market opens, you'd be a wealthy man. But underwriters are conservative with initial IPO pricings because 1) they have no real idea where a stock will go once it's public and 2) they want the stock to go up after it opens (IPOs that don't do this are said to be "broken" and sometimes never recover). 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.
- rbranson 15y ago... 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.
- deleted 15y ago[deleted]
- rbranson 15y agoThe price is set based on market analysis. That's what the company thought they could get for it. The transaction requires willing participants.
- sc68cal 15y agoTrue, though it may be that some participants are simply willing to buy the stock with the expectation that they can sell it quickly, for more than they bought it for.
- shn 15y agoThink about the market price of houses before the crash, each buyer and the seller were willing to make transaction. We all know the result. Fundamentals are important as well as prospect of the company. So we should talk about what is that prospect that can make company's current market valuation rational.
- zb 15y agoYou may say it's not their fault, but if you log in to LinkedIn today you'll notice that all of the "news" articles - now placed in an even more prominent position than normal - are about how underpriced their stock is. Entirely coincidentally, I'm sure.