I think the reason they did not go with a Dutch auction is they lack the confidence of Larry and Sergey. What if it fails? What if the bankers get pissed off and sabotage it by not working hard enough to sell the issue.
Having the price jump by 100% may be leaving money on the table but it is not a disaster. Having the IPO fail would be a disaster, and the management of LinkedIn would be personally blamed for it.
Have things become so bad that companies must ingratiate themselves with 40-50% tributes to the banks?
I hate investment wankers with a passion and would love to see the people involved in IPO spinning get the Paris 1793 treatment. But the "40-50% tribute" claim is not correct. LinkedIn only offered about 7% of its stock, so it was only a 3-4% tribute.
Knowing how scummy banks are surrounding IPOs, this was a very intelligent strategy. Now the stock can trade to a fair level and then they can do a secondary offering at a real price.
So for example, in the case of LinkedIn, the theory is that the bankers knew that the shares could go for 100% higher price than the IPO price and sold those shares to their buddies at a much lower price with the understanding that their buddies would pay them back a percentage of the money they make flipping the shares by doing various other business with the banks.
Of course none of this is proven, but it is a theory many serious people have.