MercadoLibre Bringing Back Bubble Memories

The other troubling thing about MercadoLibre's rally is how it popped after the IPO. Granted, the offering price may have been discounted to ensure a smooth launch in a turbulent market, but the market is valuing the stock at nearly twice what underwriters did.

We're seeing such pops more often in tech: VMWare has nearly tripled from its $29-a-share offering price.

But the situation is a little more serious with MercadoLibre: One of the investors burned by the low offering price was underwriter JPMorgan, which sold 5.35 million MercadoLibre shares as part of the IPO, or $96 million. But those shares would now be worth $198 million, so Morgan left $102 million on the table (and possibly more, if its analyst is right to rate it overweight).

Nor was Morgan alone. Goldman Sachs (not an underwriter) made $33 million from the 1.86 million shares it sold, and those shares are now worth $69 million. Flatiron Funds sold $22 million worth of shares that are currently valued at more than double that. It could all make for some awkward chitchat at Wall Street cocktail parties.

The post-IPO surge puts the analysts at MercadoLibre's underwriters in a difficult spot. In effect, they're explaining why they believe the stock is worth twice what their own firm thought it was worth two months ago. And how, in Morgan's case, that miscalculation cost it so much money.

But my broader concern is this: Money being pulled from the collapsing mortgage market is desperate for somewhere to go. Some of it may be piling into well-run, growth-driven companies like MercadoLibre, inflating their market value and forcing analysts to scramble for reasons why the stock is surging.

What's wrong with that? It's exactly the kind of what-me-worry? thinking that paved the way for a bubble in tech IPOs nearly a decade ago. I'm not saying it has returned now, but it's time to start worrying -- at least a little bit -- about the possibility.

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