Thursday, May 19, 2011

Linked in First Trade, $175 million gift

LinkedIn, which was founded in 2003. has begin trading its shares, under the symbol LNKD, on the New York Stock Exchange this morning. As we learned yesterday, LinkedIn priced its IPO at $45 per share, giving the company a valuation of $4.5 billion. Today, the company began trading at $83.00 per share, a 84 percent increase from $45 per share. That’s a $7.8 billion market cap. It’s now up to $90 per share, LinkedIn is offering a total of 7,840,000 shares and is looking to raise as much as $406 million in the offering. Currently there are 94.5 million shares outstanding plus 1,176,000 shares to cover over-allotments. If the company sold the over allotment, LinkedIn’s valuation could be as high as $8.5 billion.

This is the the biggest U.S. Internet IPO since Google. Yes, that’s right. LinkedIn, which barely made $15 million in earnings last year, is worth about $8.5 billion.

Let me be more clear on this, LinkedIn’s IPO, which priced last night at $45 a share, now has doubled in early trading, up to $90 a share.

LinkedIn's underwriters, Morgan Stanley, Bank of America, just fooled the company and its shareholders to the tune of an astounding $175 million. By wildly underpricing the deal and selling LinkedIn's stock to institutional clients way too cheaply.

LinkedIn's stock was trading above $80+ a share earlier this morning. Bank of America and Morgan Stanley sold the same stock to their best institutional clients at $45 a share last night. The value of LinkedIn-the-company, it seems safe to say, has not appreciated by 90%+ in the past 12 hours. And that means that, on its underwriters' advice, LinkedIn sold its stock way too cheaply. It also means that the institutional investors who bought LinkedIn's stock last night are high-fiving each other this morning, celebrating their instantaneous 90% gain. (Lots of them are probably also selling some stock).

By underpricing the stock, Morgan and BOFA gave their best institutional clients a gift of at least $175 million this morning. And that money came right out of LinkedIn's pockets and the pockets of the LinkedIn shareholders who sold on the deal.

(Specifically, assuming a fairer price for the stock would have been about $60, LinkedIn probably left about $130 million on the table. LinkedIn's selling shareholders, meanwhile, left about $50 million.)

And the best part of this screwing is the fact that LinkedIn probably has no idea it got screwed. In fact, the company is probably thrilled with the IPO result. Why? Because they've been told for so long, by so many people, that having a big "first day pop" is what every company should pray for in their IPO.

But it isn't.

Here's a simple analogy:

Imagine if the trusted real-estate agent you hired to sell your house persuaded you to sell it to her best client for $1,000,000 by telling you this was the best price she could get. And then, the next morning, the person who bought your house immediately turned around and sold it for $2,000,000 (using the agent to sell it, naturally).

And it's also true that underwriters should always try to modestly underprice deals, to the tune of a 10%-15% "IPO discount." They do this to reward institutions for taking the risk of analyzing and buying the stock of an unproven company. If there were no discount on IPOs, there would be little incentive for big investors to play ball before the offering: They'd just wait until the stock started trading and buy it then. This, in turn, would make it harder for companies to raise capital. So the modest discount, in which companies and underwriters reward investors with a good deal, makes sense.

But there's a huge difference between at 10%-15% IPO discount and a ~50% discount, which is what LinkedIn's IPO just sold for. The institutions that bought the LinkedIn stock last night are now 100% richer, just by virtue of being good clients of BOFA and Morgan. And that money came right out of the pockets of LinkedIn and the LinkedIn investors who sold on the deal.

If LinkedIn can sustain a price above, say, $75 a share, BOFA and Morgan should have sold it to institutions at $60. Because the stock was instead sold at $45, LinkedIn and its existing investors just got screwed to the tune of $175 million.

While this makes LinkedIn look like the greatest thing there are a couple of huge caution flags in this monster opening jump, One, the underwriters left a LOT of money on the table. Given this level of demand for LinkedIn stock, this IPO could have been priced much, much higher.

That would have meant more money into the coffers of LinkedIn, rather than into the pockets of the investment community. At $90 a share, LinkedIn and its selling stockholders would have raised $705 million rather than $352.8 million.

Second, the LinkedIn stock debut must raise huge questions about the private markets for selling shares in LinkedIn, Facebook, Twitter and other non-public companies. Shares of LinkedIn on those thinly traded markets such as SharesPost valued the company at $2.5 billion. If the private market valuations are off by so much, how much can we trust them?

This is the perfect scenario to see if a new bubble is being created or if it pays off to be a big client of Morgan and BOFA, at the end of the line, clients will always keep coming back for more.I really want to see the happy ending of this until then... keep writting, keep investing, 1 Million euros in less than 5 years let's make it happen.

Friday, May 13, 2011

The Millions in the World Press 2011 Amsterdam

The song and the goal remains the same a Million Euros in less than 5 years and a week of a getaway took me to my third home in Amsterdam I lived unbelievable memories missing my family but reassuring the ethernal friendship...

On my last day I got to walk alone and found myself out of the everyday working, exchanging, trading, monotonic investing way of life and I was submerged in the crude reality of life for a couple of hours I was suffering while trying to understand the images of the World press photo contest 2011

The annual World Press Photo Exhibition is the best known of World Press Photo's activities and is a leading event in the organization's calendar. Every year following the World Press Photo Contest, the winning images go on tour. In April, the exhibition was officially opened in Amsterdam and can be seen at venues around the globe until March of the next year. The tour program takes in approximately 100 cities in 45 countries and is still expanding.

The exhibition is a showcase for creativity in photojournalism and a platform for developments in the profession, part of World Press Photo's aim of encouraging and stimulating the work of press photographers around the world. The show also attracts a broader public and, because of the wide-ranging focus of the contest, forms an eyewitness record of world events from the previous year.

There were images that will stay in my memory forever and some of them were so raw that I could not find the difference between art, photojournalism and yellow journalism. Here are some of my findings:

"Julian Assange, founder of the whistle-blowing website WikiLeaks, emerges from a panel discussion at the University of London. During the year, WikiLeaks had made public a large batch of classified US military documents on Iraq and Afghanistan. It went on to release sensitive correspondence between American, Middle-Eastern, and other international diplomats, including revelations on the stance taken by Palestinian negotiators in connection with Israel. At the beginning of September, the Swedish Director of Prosecutions re-opened a previously dropped case against Assange on allegations of sexual assault. The following month an international warrant was issued for his arrest, sparking accusations of a smear campaign".

"People press through the crowd at the Love Parade in Duisburg, Germany, in a crush that left 21 dead and more than 500 injured. The Love Parade, a public party and music festival first held in Berlin in 1989, has attained cult status around the world. The Duisburg event, held on festival grounds at the site of a disused railway depot, had only one entrance - a tunnel 100 meters long and 16 meters wide. Revelers packed into the tunnel after police attempted to control access to the grounds. Estimates after the event put attendance figures at 1.4 million, but a later police statement reduced that to 400,000. Argument continued for months as to who was responsible for the disaster and an official investigation into the affair looked set to drag on into 2012. The head organizer of the Love Parade announced that the festival would not be held again".

"Julie sits with Rachel, aged 3 months, in the lobby of the Ambassador Hotel in San Francisco, where she lives with her partner Jack, who, like her, is HIV positive. The Julie Project. For 18 years the photographer documented the life of Julie Baird, whom she met by chance in San Francisco. Julie was then 18 and HIV positive, with a newborn child and a history of drug abuse. The photographer aimed to provide an in-depth look at poverty, Aids and other social issues by focusing on one woman’s struggle. Later, she wanted the project also to be a record for Julie’s children of their mother’s story, after Julie lost custody and had to give them up for adoption".

"The photo that first appeared in Berlingske in September. In the Name of Victoria. In September, a Danish daily newspaper ran a picture of an 18-month-old orphan from Nepal with hydrocephalus – the condition also known as ‘water on the brain’. She had been abandoned at birth and had no name – though hospital staff called her Ghane (‘Bighead’). Although the condition can be treated in the West, doctors in the hospital could not help her. Danish business executive Cecilie M. Hansen was deeply affected by the photo and decided to try to help the little girl. Cecilie visited Nepal, gave the girl a name – Victoria, for victory – and made arrangements with Nepal’s leading neurology clinic to operate, covering the cost herself. Because nothing had been done to relieve Victoria’s condition since birth, surgery was risky. In the time Cecilie was in Nepal, she bonded closely with Victoria, but eventually had to return to Denmark. A few days after arriving home she heard that despite doctors’ efforts, Victoria had died from heart failure".

"Milan Fashion Week. The show of TV star-turned-fashion designer Valeria Marini"

"Matador Julio Aparicio is gored by a bull after losing his footing during a bullfight in Madrid. One of the animal's horns pierced his throat and punched through the bottom of his mouth, puncturing his tongue and fracturing his jaw. After an emergency one-hour operation in the medical center at the bullring, Aparicio was transferred to hospital for further surgery. He recovered, and returned to the ring in August".

"The Netherlands' Demy de Zeeuw is accidentally kicked in the face by Uruguay's Martin Caceres during a World Cup semi-final soccer match in Cape Town, South Africa on 6 July. The Dutch won the match 3-2. De Zeeuw was taken to hospital with a suspected broken jaw. He was later able to rejoin his teammates but was not selected to play in the final, when the Dutch lost 0-1 to Spain".

Overall it was a great weekend full of surprises and now back in business waitting to fulfill dreams that will become true soon, just with the idea that time goes by... and I want to keep the real moments forever. keep writing keep dreaming a Million euros in less than 5 years welcome to my journey...