Having eagerly followed LinkedIn's IPO and first trading day, I can't seem to shake that strange feeling of deja vu. LinkedIn shares traded as high as $122.70, closing at $94.25, a whopping 109% premium to the company's listing price of $45 per share on the NYSE. It's certainly not the first time a company's first trading day has created a frenzy and pushed shares significantly higher...but the thing that worries me are the all too familiar parallels to the late 1990's early 2000's dotcom boom and bust.

 

According to Bloomberg, at the close, LinkedIn was valued at $8.91 billion dollars, some 24 times 2011 revenue (annualised from first quarter revenue figures). Should common sense prevail, I feel there may very well be some punters walking away from LinkedIn a little lighter...

Time is flying by and June 30th been and gone. As such I thought it fit to revisit the article I wrote at the start of the year discussing whether cash had overtaken equities as the investment of choice for 2010. While Europe's debt woes, the United State's slow recovery and China growth concerns have thrown oversize spanners in the works for equity investors (some may say these spanners only unlock great bargains), the effect on wholesale funding for banks has resulted in a continuation of great returns for cash investors, albeit at a slighter lower rate of return in some cases.

 

At the start of the year we were in the middle of a “perceived” rapid recovery with expectations of continuous rate rises and many an economist predicting a cash rate of 5% or more. Earnings too were expected by many to be on the rise, leaving many discussing whether to invest in cash or equities in 2010. It took only months however for the world economic concerns mentioned above to change the perceptions and expectations of must pundits.

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Newcrest's bid for Lihir Gold today joins a string of high profile M&A attempts of late and signals the intent of big mining companies with large cash surplus' going forward.   Lihir's board today rejected the offer but signalled they may be more open to a higher bid in an effort to maximise the return for shareholders.  LGL's shareprice closed up over $1 to $4.04 today.

 

Newcrest's bid alongside Peabody Energy's bid for Macathur Coal, Bright Food Group for CSR's sugar unit and Shell's successful bid for Arrow Energy signals an impressive return to M&A activity.  Looking forward, it is hard to see a slow down in mergers and acquisitions given the cash surplus many larger material's companies will be building as a worldwide recovery continues to unfold.  The stength in the materials sector should fuel purchases by larger diversified companies of the likes of BHP.  Balance sheet strength and strong cash flows after the slowdown through 08/09 offer great opportunities to add new assets and fuel growth.

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