LinkedIn IPO today. Bubble Time? (investor, stocks, buy, sell)

[howard555]

Originally Posted by dangles

How can anyone say that a company is 1000 times worth their net income? Isn’t that like paying 1000 dollars to earn 1 dollar? That isn’t a bubble, it’s a delusion. People claim the institutions stole money setting such a low offering price, but in reality they set intentionally high prices as most IPO post sales fall anywhere from 30-75% of their IPO - this was delineated in Benjamin Graham’s Intelligent Investor. What was true in the 70s is true today.

Stay away from IPO hype.

One analyst said he would buy the stock at $25.

It hit $122 the first day, and down to $88 today.

Today, Tuesday, is the first day that traders can short shares of LinkedIn. That is, if you can find shares to borrow and are willing to pay the price.
In the market for borrowing stock, it's still "old school." Prime brokers are tight lipped. Traders still have to work the phones to locate shares and get pricing.

Options begin trading on this stock either tomorrow or Thursday.

Lawrence Haverty of Gamco Investors said in an interview with Bloomberg News that LinkedIn could trade all the way down to $30 after insiders and early investors are allowed to sell their shares. Insiders and money managers have 85.7 million Class B LinkedIn shares that cannot be sold until six months from the IPO, according Bloomberg.

[Willy702]

People getting the opportunity to short it are about as privileged as those who got to buy it at IPO. Lots of noise being made about something so insignificant to the bigger picture.

[howard555]

Just wait until tomorrow, Friday the 27th, when options begin trading on LNKD.
Don't want to spend $9000 on 100 shares?
Try one call option.

[JazzyTallGuy]

Originally Posted by gichicago

So LinkedIn has its IPO today, and at the time of this post is trading somwhere in the 80-90 from an IPO prce of 45. This puts it at a a paltry PE ratio of 980.

LinkedIn IPO Opens For Trading At $83, 980x Annualized P/E | zero hedge

Does anyone think we are in a new bubble, and if so what stage? Are we at the Netscape IPO stage, where things are getting started, but room to run, or theGlobe stage of irrational exuberance?

There is a lot of money chasing some select companies that really have questionable valuations and more importantly questionable revenue models. In the tech bubble from 1997 to 1999 damn near everything remotely related to the interenet was being overvalued.

[Willy702]

Originally Posted by JazzyTallGuy

There is a lot of money chasing some select companies that really have questionable valuations and more importantly questionable revenue models. In the tech bubble from 1997 to 1999 damn near everything remotely related to the interenet was being overvalued.

There isn't any value consideration going on here. Its just a shortage of shares. 7.8M shares were issued, maybe half at best are available for trade. Over 1.5M shares are trading a day which means close to half all theoretically available shares are changing hands daily. That isn't valuation trading, that is pure speculation.

This particular company and a number of Chinese IPOs are like the tech bubble because companies were doing the same thing back then. Demand was through the roof and at most companies were putting 10% of the ownership out into the market. Maybe some fools are getting into this game, but the smart and even half-smart money realizes whats going on here.

[Lakewooder]

One of the last things CNBC anchor Mark Haines called before his untimely death "LinkedIn is a Bubble!"

[howard555]

Originally Posted by Lakewooder

One of the last things CNBC anchor Mark Haines called before his untimely death "LinkedIn is a Bubble!"

The stock has a very negative implication with a close look at the options that opened for trading today.

Since there are so few shares owned, it is even harder to find shares to short. So, many are buying put options, since they can not short the stock. The implied volatility in the options is rather remarkable.
An example are the February calls and puts for LNKD.

I'll compare LNKD options to another stock, so you can see the variance


Take Joy Global, it is close to LNKD's closing price.

To buy a call option above the current stock price and to buy a put option below the stock price is called a strangle. Your position is around the stock price in both directions.
If the implied volatility from now to option expiration, is the same, the call and put options should be about the same value, if they are about the same distance from the stock price.

The Joy Global stock is $89.00. They do not have Feb. options right now, so I'll use the January options.
The JOYG Jan. 2012 call option with a strike of $90 is $10.55.
Now, the stock is not exactly between $90 and $87.50, but it is close enough for the example.
The JOYG Jan. 2012 put option with a strike of $87.50 is.....$10.40.
Almost the same. Right?


Now let's look at the LNKD Feb. put and call strangle around the stock price which is $88.21, almost in the middle of the $90 call and $85 put.
The Feb. 2012 $90 call on LNKD is near $9.80.
The Feb. 2012 $85 put on LNKD is NOT near $9.80.
It's a massive $24.50.


So, the fact that no one can short the stock without paying very heavy cost to borrow shares, has the put options that are about $2.50 below the stock, way over the value of the call options that are about $2.50 above the stock price, for the same month, February 2012.


The January call options for JoyGlobal should be LESS than the February $90 call options for LNKD because:
1. The LNKD options go further out.
2. LNKD is supposed to be far more volatile than JOYG.

But they are not.
WHY?
Because the implied volatility suggests that LNKD has less chance of rising above $100 than JOYG has of rising to $100.

The JOYG Jan. $87.50 put is $10.40, and the Feb. $85 put for LNKD is $24.50. LNKD has a far greater implied chance of falling below $61.50 ($85-$24.50) than JOYG has to fall below $77.10 ($87.50 - $10.40)

Far more implied downside to LNKD, than upside, based on option pricing.

[Currency Pair Crocodile]

I missed this one and I sat like a monkey all day watching it double.

I faced some terrible margin calls after Japan, which knocked me off investing for a good three months. I have covered all calls and am back in the game. If Japan hadn't happened, I could have used some dough on Linked In.

I didn't even imagine this dumb spamming website was worth so much. I still haven't updated my resume on there after 2008. Now I'm forced to respect it

[Willy702]

But what is it really worth? I just think this is all dumb, outside of very astute observers the media is falling into the trap of believing in extrapolation. Its sort of like AIG, the government's piece is worth a lot if you take a tiny floating piece that trades and say all shares are worth that. Problem is the non-floating part owned by US Treasury couldn't possibly be sold for anything near market price right now. If you truly believe the equity owners who don't have publicly traded shares can get the same value for their stakes as shareholders can right now you are just plain gullible.

This was a brilliant move by bankers, make no mistake. They sold these guys who didn't really need the money that much that they could create a demand squeeze and take advantage of Facebook's unwillingness to go IPO. It was a pure opportunity to bring in capital without really giving up much and they took it. It means nothing about the market, the competitive space they are in or what the company is really worth and they all know it. It was just a well-executed strategy and the financial and wider media is just eating it up not realizing what is fact and what is just hype.

[Currency Pair Crocodile]

Originally Posted by Willy702

But what is it really worth? I just think this is all dumb, outside of very astute observers the media is falling into the trap of believing in extrapolation. Its sort of like AIG, the government's piece is worth a lot if you take a tiny floating piece that trades and say all shares are worth that. Problem is the non-floating part owned by US Treasury couldn't possibly be sold for anything near market price right now. If you truly believe the equity owners who don't have publicly traded shares can get the same value for their stakes as shareholders can right now you are just plain gullible.

This was a brilliant move by bankers, make no mistake. They sold these guys who didn't really need the money that much that they could create a demand squeeze and take advantage of Facebook's unwillingness to go IPO. It was a pure opportunity to bring in capital without really giving up much and they took it. It means nothing about the market, the competitive space they are in or what the company is really worth and they all know it. It was just a well-executed strategy and the financial and wider media is just eating it up not realizing what is fact and what is just hype.

This is only a lesson learned for the future. I have started to muster money for the Facebook IPO. It will go thru the roof the first two days, might triple

It might make LinkedIn look like a kid.

Welcome to the world of unholy speculations and pumping.