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A banner announcing Linkedin Inc. listing on the New York Stock Exchange hangs on the face of the building in New York, May 19, 2011.

Mike Segar/Reuters

It didn't take long for LinkedIn Corp. to lose its lustre. Despite surging to a high of $122.70 (U.S.) on its first day of trading, following a spectacularly successful initial public offering in May, the shares have since been slipping lower, and lower. They fell 4.9 per cent in late-morning trading on Wednesday, bringing them to $77.56.

That's lower than the opening price of $82 on May 19, meaning that anyone who jumped onto this bandwagon is now underwater. And if you bought the stock above $120 on that first day of trading, when the shares appeared to be defying gravity, well, ouch.

Are investors having second thoughts? The stock certainly divided opinion from the start, given that the social networking company had produced earnings of just $15.4-million last year, giving the stock a price-to-earnings ratio somewhere in the high hundreds.

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Social networking is still hot, of course. But as the Wall Street Journal noted, LinkedIn has become easier to bet against. When the stock began trading, it was difficult to make bearish investments, such as shorting the stock or buying options. Now, though, this is easier and cheaper to do, and apparently bearish investors have been moving in.

Meanwhile, at least early-early investors - those who were able to get their hands on LinkedIn shares at the offering price of $45 before they began trading on the open market - are still ahead by more than 70 per cent. For others, LinkedIn provides another example of why it is best to avoid most IPOs.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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