Just recently, I started dabbling in penny stocks - and am doing pretty nicely from it. More so from earning a little beer money, I've enjoyed joining in because I think my first month of trading has been one of the most fascinating educational experiences of my life.
Continuing this learning experience, I was astonished to see what happened when social networking site LinkedIn went public. Their $45 initial stock price skyrocketed like you'd normally only see penny stocks do.
Many people are now claiming that this is because the underwriters of LinkedIn, Bank of America Merrill Lynch and Morgan Stanley, deliberately set the initial offering price far too low.
What would be the benefit of such a move? A bunch of stockbrokers being able to buy into LinkedIn stock knowing full well that it was dramatically oversold - and doubling their money in just a day.
For LinkedIn, the jump in stock price suggests that they could have made an extra $130 million from going public if Bank of America Merrill Lynch and Morgan Stanley had actually put them on the market at a "fair price." It's just proof that bankers remain flagrantly despicable despite having their dirty laundry aired following the 2008 financial meltdown - and even multimillion dollar companies aren't immune to their shenanigans.