So, the NY Times Joe Nocera (as well as Henry Blodget) think that the investment bankers scammed LinkedIn’s owners in favor of the investment bankers other customers.
Grand conspiracy theories – as well as criminal prosecutions – certainly have been hatched with less.
But as the Epicurean Dealmaker lucidly explains (also here), morality plays and conspiracy theories are hard to piece together given the wide variety of forces that are in play when owners of a company tap the public markets with a piece of their company. Heck, LinkedIn’s shares are trading at a massive multiple to what they traded for recently in private in secondary markets.
The instinct of most politicians and much of the mainstream media is to embrace simple “villain and victim” morality plays when attempting to explain a particular outcome in which someone gained at the expense of someone else.
Take, for example, investment loss. The more nuanced story about the financial decisions that underlie a failed investment strategy doesn’t garner sufficient votes or sell enough newspapers to generate much interest from the demagogues or muckrakers. That’s why we periodically endure witch hunts — such as demonizing speculators – when it’s unquestionable that speculation in markets has a beneficial purpose.
Morality plays are comforting because they make it easy to identify and demonize the villains who are supposedly responsible for trouble. The truth is usually far more nuanced and complicated, but ultimately more rewarding to embrace.
“when it’s unquestionable that speculation in markets has a beneficial purpose”
The article you have linked to doesn’t at all explain the benefits of speculation, it just tries (poorly) to not lay blame on speculators for increasing prices.
Frankly, this is a shocking story – an I-Bank clipping its client for the benefits of others (who are their real clients). I-Banks long ago sacrificed their conflicts of interest at the alter of ever increasing fees.
Each I-Banking engagement letter should come with a disclaimer, “The moment this letter is effective, we, the I-Bank, no longer represent your interests but the interests of those buying the securities you want us to sell. Our goal is to get as close as we can to your goals without you pulling the deal. Oh, and we are not responsible for any of the advice we give you despite the 7% fee you are paying us.”
Free Glass-Steagall!!