how can little investors compete in good faith: Everyone gets screwed see below DOES this put it in to perspective little investors your blah blah seems rather pathetic Your not little special endagered fish if you want to swim in the ocean be aware you may get chomped.
My question do you people not read papers research yourselves look at options cApital raisings etc, theirs a hint for you all deluded instead of bots as an excuse RESEARCH at least options.
also cudeco histircally was a classic options exercised at high than sp declined all the info is their if you understand people are trying to screw you seriously no ones holding your hand stop complaining, an investment in bhp or rio would have giving you more with no activity, you live & learn but you would have nothing to talk about on HC
The old boys' network: LinkedIn reveals investment bankers up to nasty old tricks http://www.smh.com.au/business/world-business/the-old-boys-network-linkedin-reveals-investment-bankers-up-to-nasty-old-tricks-20110523-1f0sg.html
If there's one thing we've all learnt in the aftermath of the financial crisis, it's that stiffing your client is not a crime. Not if you're an investment bank.
Deutsche Bank, according to a report by the US Senate's Permanent Subcommittee on Investigations, sold its clients subprime mortgage bonds that one of its own traders at the time described as ''pigs''.
Goldman Sachs took unseemly advantage of unsuspecting clients to offload its most toxic assets in 2007 and 2008. During the subprime bubble, this kind of behaviour was par for the course. Advertisement: Story continues below Old tricks ... "Bankers are rewarding their friends and themselves."
Bad business ... "Bankers are rewarding their friends and themselves." Photo: Reuters
It still is, apparently. Last week, LinkedIn, an internet company that connects business professionals, became the first major social media company to go public. The company had hired Morgan Stanley and Bank of America's Merrill Lynch division to manage the initial public offering (IPO) process. After gauging market demand, which is what they're paid to do, the investment bankers priced the shares at US$45. The 7.84 million shares it sold raised $US352 million for the company. For this, the bankers were paid 7 per cent of the deal as their fee.
For a small company with less than $US16 million in profits last year, $US352 million in the bank sounds pretty wonderful, doesn't it? But it really wasn't wonderful at all. When LinkedIn's shares started trading on the New York Stock Exchange, they opened not at $US45, or anywhere near it. The opening price was $US83 a share, some 84 per cent higher than the IPO price.
By the time the clock had struck noon, the stock had vaulted to more than $US120, before settling down to $US94.25 at the close. The first-day gain was close to 110 per cent.
I have no doubt that almost everyone at LinkedIn was thrilled to see the run-up; most executives at start-ups usually are. An IPO is an important marker. And, of course, the executives themselves are suddenly rich. But, 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 favours 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.
As Eric Tilenius, the general manager of Zynga, wrote on Facebook: ''A huge opening-day pop is not a sign of a successful IPO, but rather a massively mispriced one. Bankers are rewarding their friends and themselves instead of doing their fiduciary duty to their clients.''
There is nothing wrong with a small ''pop'' in the aftermath of an IPO; investors don't want to buy a stock that is going to go down immediately. But during the internet bubble of the 1990s, the phenomenon of investment bankers wildly underpricing IPOs so that money could be diverted to favoured investors got completely out of hand - stocks would sometimes rise 500 per cent on the first day. It was obscene.
Indeed, most journalists writing about LinkedIn focused on the first-day run-up as evidence that we've entered another internet bubble. But over at the Business Insider blog, Henry Blodget, who knows a thing or two about bad behaviour on Wall Street, had the perfect analogy for what the banks had done to LinkedIn.
Suppose, he wrote, your trusted real estate agent persuaded you to sell your house for $US1 million. Then, the next day, the same agent sold the same house for the new owner for $US2 million. ''How would you feel if your agent did that?'' he asked. That, he concluded, is what Merrill and Morgan did to LinkedIn.
It's worth remembering that most of the young internet companies with those eye-popping IPOs back in the day are long gone. With their flawed business models, maybe they were doomed from the start - but the cash they left on the table at the IPO might have allowed at least a few of them to survive.
Similarly, LinkedIn is still a fragile enterprise. Its business model remains unproved. It is going to have to grow awfully fast to justify its stock price. Its executives may yet rue the day they let themselves be sold down the river by their investment bankers. LinkedIn is supposed to be the client, but it was treated like the mark.
Ever since the financial crisis, investment bankers have been questioned about whether they have any larger social purpose besides making money. What they invariably say is that they play a critical role in capital formation, meaning that they help companies raise the money they need to grow and prosper.
The LinkedIn deal suggests something darker. The crisis hasn't changed them a bit. They're still just in it for themselves.
