

Things You Could Buy for $4B Instead of LinkedIn  - psawaya
http://seekingalpha.com/article/270818-5-things-you-could-buy-for-4b-instead-of-linked-in

======
raganwald
I remember reading about a teenager who was persecuted (I don't say
"prosecuted," because I think he settled for a fraction of his profits) for
buying stocks and making bullish comments about them on the Internet. He fully
disclosed that he bought the stock and liked it.

Now I read this bearish comment and the author discloses he intends to buy
puts. Given that the stock market is run on sentiment, is there a clear line
drawn between legal and illegal manipulation? Or does it come down to whether
you are in the club or out of the club?

~~~
ChuckMcM
A friend of mine lost nearly everything selling Yahoo! short in the bubble. He
kept saying, this is riduculous, it can't go on. Eventually he was proven
right but the window was longer than he imagined. By the time Google went
public he got a second mortgage on his house and bought as much stock as he
could at the IPO and held on to it. (I do thing he sold it in the high 600's).

On the apocryphal teenager story it would be helpful to have a citation since
there were many stories of pump-n-dump artists in the dot com days, however
most of them involved people doing actually sketchy, probably illegal things
(like sending email spam to millions).

~~~
raganwald
Jonathen Lebed:

[http://www.nytimes.com/2001/02/25/magazine/jonathan-
lebed-s-...](http://www.nytimes.com/2001/02/25/magazine/jonathan-lebed-s-
extracurricular-activities.html)
[http://www.amazon.com/gp/product/B004R96TSM/ref=as_li_ss_tl?...](http://www.amazon.com/gp/product/B004R96TSM/ref=as_li_ss_tl?tag=raganwald001-20)
[http://news.bbc.co.uk/hi/english/static/in_depth/programmes/...](http://news.bbc.co.uk/hi/english/static/in_depth/programmes/2001/future/tv_series_1.stm)
<http://en.wikipedia.org/wiki/Jonathan_Lebed>

~~~
ChuckMcM
Up top you wrote: "He fully disclosed that he bought the stock and liked it."

But the articles say: "... the kid had bought stock and then, ''using multiple
fictitious names,'' posted hundreds of messages on Yahoo Finance message
boards recommending that stock to others. "

That latter is "classic" pump-and-dump. Create a fake pattern of interest in a
stock you bought and then sell into that interest that you created. He should
have been prosecuted since it's illegal.

I'm guessing his current 'newsletter' has the disclaimer it does (at least
according to Wikipedia) because now he knows if he doesn't include it he'll go
to jail.

~~~
raganwald
That isn't the whole story according to the book. In the book, he explains
that he tried posting hundreds of messages under his own name, but there was
some mysterious limit on multiple posts, so he created the extra accounts.
Michael Lewis wrote that he didn't try to make them look like separate people,
just separate accounts. Furthermore, he posted the exact same message, either
through lack of guile or lack of intent to deceive.

In his emails he said he liked the stock and owned it. How is this deceit? He
liked it and owned it. He said the price would go to such-and-such. It did. If
I post here on HN as raganwald and again as regbraithwaite, is it deceit? How?
There is no strong injunction against multiple accounts on HN.

Given that the internet does allow you to create multiple email addresses and
that Yahoo doesn't actually insist on one account per real person (unlike, say
Facebook), Michael wrote that it is far from clear that he was breaking the
law, which is why the SEC settled: They were desperately afraid of losing the
case and having the emperor revealed to have no clothes:

There really isn't anything different between Jonathan Lebed and a brokerage
leading an issue, except membership in a cozy little club. It's total
clutching at straws to say he pumped and dumped but companied are allowed to
hire PR firms to talk up their prospects.

Sure, the SEC will always try to find some trivial technical difference to
justify closing the Jonathans down, it's just like a casino kicking a card
counter out for "cheating."

------
Jd
There is a classical school of valuation that has difficulty dealing with
Internet companies. Namely, a number of VCs, etc. have recognized that having
a large number of passionate (or possibly addicted) users is the ticket to
desirability and also valuation. It is better, in this sense, to have an
indispensable product that is free or near free, than to have 5% of the
population paying you $1K per year.

Does this make any sense? Well, given that the stock market largely runs on
hype, it makes lots of sense if you are trying to make money (the stated aims
of VCs). Large investment banks that underwrite IPOs know that money flows
where there is hype and they stand to make a good deal more where there is
hype. Not only that, hype is ultimately close to (although certainly not the
same as) making a sale.

There is an additional wrinkle, social media, which no one knows what to do
with, yet is so the subject of so much hype it is sure to attract lots of
money. This system clearly is not broken when now big players like Facebook
are able to attract money, expand, then once they've captured virtually the
entire market and gotten them "addicted," they can capture advertising revenue
and a percentage on Farmville-esque games. So social is weird, but the strange
system in place, even if it doesn't make sense to the casual observer, seems
to be working in some strange way. And it really is different. A good product
can capture most of the viable US market in a year or two, which is virtually
impossible in other arenas, but this is made possible by rapid growth, which
is also made possible by the influx of capital.

Ironically, other examples like Lady Gaga are even more driven by the hype
machine and can fade even more quite quickly, meaning that if you were
investing in her you would be depending almost entirely on hype, while the
hype for Linked-In is based on an indispensable product.

~~~
deathflute
Most of what you wrote made some sense until I read the bit about linked-in
being indispensable ;)

------
mrb
My own, and favorite, idea: you could buy one thousand early-stage startups
valued $4M each.

~~~
lsb
Or give a hundred thousand startups 40K seed funding.

~~~
iwwr
Or $1000 for every person sitting in a coffee shop in SF.

------
SeanDav
A large part of this is "The Greater Fool" syndrome. Doesn't matter what you
pay for the shares, you can always find a greater fool to sell them to!

Oh and 4B$ will buy about 1/10 to 1/20 of Facebook

------
code_duck
"I bet DNB will be around in for another 50 years. Do you think LNKD will be?"

I'd like to go back a few years and ask the author whether Lehman Brothers and
Bear Stearns will be around in 50 years.

------
lsc
while I agree with the guy, I was pretty amused by the edit to the opening
line:

"Before you go and buy LinkedIn (LNKD) shares at the IPO price of $45 - a $4
billion valuation (Ed: Shares are now trading hands at $83)"

Oh man. ouch.

~~~
flipbrad
I want a version of this article based on the share price as I write this: not
$45, but $108.

------
gallerytungsten
While suggestions 3-5 are relatively facetious, the first suggestion, for
NRGY, is kind of interesting. While a 7.9% dividend is not the highest out
there, it's nothing to sneeze at.

------
cryptoz
No mention of spaceships? Forget funding a bunch of small internet startups.
Build a moon base!

Japan's got plans to do it for half of that $4 billion:
<http://www.google.ca/search?q=robotic+moon+base+japan>

------
missing_cipher
"commercial airliner dogfights.". Sounds like my kind of thing.

------
bproper
Hmmm...half of Skype.

------
p_h
Looks like buying the puts was a bad idea

~~~
mikeryan
a. you can't yet short linkedin. b. how would you know? Its way to early to
figure out what's going to happen there.

I don't like linkedin's current valuation - but I think shorting it in front
of several very high profile tech IPOs would be foolhardy at this point.

~~~
sabat
It's a matter of differentiating between a) what we recognize as the real
earnings potential (which some see as fairly limited), and b) what John Q.
Sharebuyer and Joe C. Fundmanager will probably do (buy buy buy, it's the
interwebs!). The reality of 'b' means that shorting is not wise.

------
0ffw0rlder
100 million in t-bond & index funds and take a vacation.

