Short logic

I wonder where the border between comical and criminal goes, but JPMorgan, Morgan Stanley, and Bank of America Merill Lynch are sure testing it. They all just pushed “research” to support a fantasy price target of $85-92/share. The stock had been trading around $65 for a while, but LinkedIn’s underwriters have successfully pumped to stock to $85.

So they want you to pay $85-92 per share for a company that posted 9 cents per share in earnings last year (or put another way, value a company with $18 million in profits at $8 billion). Heh. I’m sure this analysis is entirely objective, completely based on fundamentals, and has nothing at all to do with the fact that this gang of shysters were the very same behind the IPO.

How are these cats rationalizing this fantasy price target?

Douglas Anmuth of JPMorgan had similar praise. The analyst, who has an overweight rating on the stock and an $85 price target, said the Internet company was “disrupting both the online and offline job recruitment markets.” Given its leading position as a social network for professionals, he said, LinkedIn should also be able to capture a greater share of the $27 billion global market for staffing.

Ohhh, it’s disruptive. Well, sign me up a bajillion shares, then. Hey, wait, LinkedIn has been around for a fucking decade. If they were going to so massively disrupt recruitment as to be worth $8 billion, we’d probably have seen some of this disruption by now.

Now it’s entirely possible that LinkedIn is going to pull some pink rabbit with fluffy money ears out of their hat and suddenly become massively profitable, as to justify the $8 billion valuation. It’s just that we’ve seen nothing so far to suggest that to be the case. To hear the underwriters of LinkedIn’s IPO trying to trick markets into lifting the stock price (which was already grossly over-priced at $65!) is simply disgusting.

Compare this to some actual analysis of the business that puts a price target of LinkedIn at mid-twenties.

The conflict of interest for these investment banks is staggering. LinkedIn paid them $30 million to take the company public. That’s more money than the company has ever made! But as is plainly clear, these guys are more than willing to ride their good name into the mud. The pump tactic worked and LNKD is up more than 10%.

Wall Street finest hard at work.