Showing posts with label IPO. Show all posts
Showing posts with label IPO. Show all posts
Thursday, November 19, 2015
Friday, September 19, 2014
Thursday, September 18, 2014
Thursday, October 10, 2013
Tuesday, May 29, 2012
Wednesday, May 23, 2012
Tuesday, May 22, 2012
Sunday, May 20, 2012
The Limerick of Finance for 05/20/12
Facebook shares could not find a floor
Morgan Stanley stepped in to buy more
The debut price can't hold
The growth story's now old
Investors will head for the door
Morgan Stanley stepped in to buy more
The debut price can't hold
The growth story's now old
Investors will head for the door
Thursday, May 17, 2012
Monday, May 14, 2012
Thursday, May 03, 2012
Carlyle Group (CG) IPO Disappoints Market
The Carlyle Group (CG) has returned a stunning performance for its founders and private investors since the 1990s. Its performance today in its IPO was not so stunning, trading below the first estimates of its filing price range.
Carlyle's investment performance has a lot do with the health of its favorite sectors: defense, aerospace, and health care. Growth in those sectors has been driven by big factors (like government spending) out of Carlyle's control for much of the firm's existence. Those fire hoses are going to run dry in a couple of years. U.S. defense spending will decline as our land wars in the Middle East and Central Asia wind down. Aerospace is on the ropes again thanks to high oil prices and perennial bankruptcies (here goes AMR through Chapter 11). Health care spending will be whittled down by some combination of government-imposed cost controls and a probable hyperinflation attempt by the Fed.
More importantly from my perspective is that Carlyle is one of the private equity firms that wouldn't hire me years ago went I sent them my resume. I thought at the time that my knowledge of finance and military affairs would have made me a shoe-in for one of their analyst jobs. It turns out that my expertise was less relevant than my lack of a pedigree. The one Carlyle employee I've ever met was a junior analyst with a bachelor's degree from Notre Dame, my alma mater. His response to my inquiry for an informational interview was to brush me off. The dude was two years younger than me and had no MBA (I had just finished mine) and considered me to be a loser. That told me more about what Carlyle values in their employees than any formal interview would have revealed.
My pedigree and connections didn't meet Carlyle's expectations. My industry knowledge and academic credentials were irrelevant. Carlyle built a successful business model on inside connections to big shots who understood where government spending goes. Now that government spending has peaked in the face of an inevitable decline, Carlyle's performance is starting to disappoint Mr. Market. This lackluster IPO is the first sign.
Full disclosure: No position in CG or any of its portfolio companies at this time. No position in AMR either.
Carlyle's investment performance has a lot do with the health of its favorite sectors: defense, aerospace, and health care. Growth in those sectors has been driven by big factors (like government spending) out of Carlyle's control for much of the firm's existence. Those fire hoses are going to run dry in a couple of years. U.S. defense spending will decline as our land wars in the Middle East and Central Asia wind down. Aerospace is on the ropes again thanks to high oil prices and perennial bankruptcies (here goes AMR through Chapter 11). Health care spending will be whittled down by some combination of government-imposed cost controls and a probable hyperinflation attempt by the Fed.
More importantly from my perspective is that Carlyle is one of the private equity firms that wouldn't hire me years ago went I sent them my resume. I thought at the time that my knowledge of finance and military affairs would have made me a shoe-in for one of their analyst jobs. It turns out that my expertise was less relevant than my lack of a pedigree. The one Carlyle employee I've ever met was a junior analyst with a bachelor's degree from Notre Dame, my alma mater. His response to my inquiry for an informational interview was to brush me off. The dude was two years younger than me and had no MBA (I had just finished mine) and considered me to be a loser. That told me more about what Carlyle values in their employees than any formal interview would have revealed.
My pedigree and connections didn't meet Carlyle's expectations. My industry knowledge and academic credentials were irrelevant. Carlyle built a successful business model on inside connections to big shots who understood where government spending goes. Now that government spending has peaked in the face of an inevitable decline, Carlyle's performance is starting to disappoint Mr. Market. This lackluster IPO is the first sign.
Full disclosure: No position in CG or any of its portfolio companies at this time. No position in AMR either.
Monday, April 23, 2012
Wednesday, February 01, 2012
Facebook IPO Looking Smaller Already
Greedy financial advisors love to gouge their clients by pushing some hot new thing. The hot new thing in the 1990s was an Internet company going IPO. Everything old is new again. Facebook's long-awaited IPO is almost ready. The company is making plenty of money but there are still plenty of reasons why I'm not buying any FB shares. These are the same reasons I didn't buy shares in any tech companies fifteen years ago.
Facebook's sector has no barriers to entry. The basic principles of good social media design are now universally accepted: a central scrolling timeline with constant minor tweaks to add data embeds; a front page with sidebars to commonly used items like an accepted appointment reminder; a simple messaging tool; and a couple of other gizmos. All of the attendees at social media conferences pick up on these key items. Any of them could rapidly create and deploy a competitor to FB at little or no cost. Someone in China has probably already started.
Facebook's business model expects unlimited compound growth. The user base is already so large that FB has probably saturated the market for all literate computer users and as many of the semi-literate ones who can be reached. Growing market share into "under-computed" parts of the globe is probably a waste of effort. Maybe semi-intelligent metering devices linked to energy "smart grids" could be some blue-sky source for exponential growth, especially if they are enabled with their own avatars that can push updates to their owners. On second thought, forget I said that. Semi-intelligent bots crawling around Facebook 2.0 sounds like a scenario for a globally self-aware AI.
Facebook offers little customer service. I use this platform daily and I still cannot figure out how to turn off certain applications. Facebook claims to change its design to enhance the user experience but hasn't yet mastered the arts of testing changes with trial runs. They should take a hint from how Microsoft and Apple manage their developers' conferences. App designers already congregate to display their monetized wares, but it is not clear how well Facebook cultivates their contributions. Maybe I should attend the next Facebook developers conference so I can ask them what changes would make the platform more valuable.
Facebook's CEO is still running a big company like a small one. Mark Zuckerberg is undoubtedly a sharp guy. The problem founding CEOs often have is their inability to run a large, mature company the same way they ran the startup version when it was still in their garage. Steve Jobs at Apple was the rare founding CEO who could make the psychological transition. Bill Gates at Microsoft did it too, growing into larger strategic roles later in life and eventually stepping away completely. Jerry Yang at Yahoo could not pull this off and that is why Yahoo has been so troubled for so long. I have not seen any evidence yet that Mr. Zuckerberg is capable of making the kind of transition that will cement his legend as a transformational entrepreneur. Anecdotal stories of temper tantrums and spiteful terminations are not encouraging signs.
Count me out of the FB IPO. The smartest money on the planet usually likes to liquidate big private stakes when they smell troubled times ahead. Note that Blackstone Group went IPO in the summer of 2007, just before the market's all-time high. Major smart money is pushing this IPO both as a liquidity event for their own stakes and as a positive news event that will push more IPOs through the deal pipeline. The underwriters are already spinning the $5B debut as a deliberate step down from the planned $10B deal for the sake of conservatism and follow-on interest. That's a nice story. Maybe they're lowering expectations just in case it doesn't do so well.
Nota bene: I am a heavy user of Facebook but I have no investment in FB at this time.
Facebook's sector has no barriers to entry. The basic principles of good social media design are now universally accepted: a central scrolling timeline with constant minor tweaks to add data embeds; a front page with sidebars to commonly used items like an accepted appointment reminder; a simple messaging tool; and a couple of other gizmos. All of the attendees at social media conferences pick up on these key items. Any of them could rapidly create and deploy a competitor to FB at little or no cost. Someone in China has probably already started.
Facebook's business model expects unlimited compound growth. The user base is already so large that FB has probably saturated the market for all literate computer users and as many of the semi-literate ones who can be reached. Growing market share into "under-computed" parts of the globe is probably a waste of effort. Maybe semi-intelligent metering devices linked to energy "smart grids" could be some blue-sky source for exponential growth, especially if they are enabled with their own avatars that can push updates to their owners. On second thought, forget I said that. Semi-intelligent bots crawling around Facebook 2.0 sounds like a scenario for a globally self-aware AI.
Facebook offers little customer service. I use this platform daily and I still cannot figure out how to turn off certain applications. Facebook claims to change its design to enhance the user experience but hasn't yet mastered the arts of testing changes with trial runs. They should take a hint from how Microsoft and Apple manage their developers' conferences. App designers already congregate to display their monetized wares, but it is not clear how well Facebook cultivates their contributions. Maybe I should attend the next Facebook developers conference so I can ask them what changes would make the platform more valuable.
Facebook's CEO is still running a big company like a small one. Mark Zuckerberg is undoubtedly a sharp guy. The problem founding CEOs often have is their inability to run a large, mature company the same way they ran the startup version when it was still in their garage. Steve Jobs at Apple was the rare founding CEO who could make the psychological transition. Bill Gates at Microsoft did it too, growing into larger strategic roles later in life and eventually stepping away completely. Jerry Yang at Yahoo could not pull this off and that is why Yahoo has been so troubled for so long. I have not seen any evidence yet that Mr. Zuckerberg is capable of making the kind of transition that will cement his legend as a transformational entrepreneur. Anecdotal stories of temper tantrums and spiteful terminations are not encouraging signs.
Count me out of the FB IPO. The smartest money on the planet usually likes to liquidate big private stakes when they smell troubled times ahead. Note that Blackstone Group went IPO in the summer of 2007, just before the market's all-time high. Major smart money is pushing this IPO both as a liquidity event for their own stakes and as a positive news event that will push more IPOs through the deal pipeline. The underwriters are already spinning the $5B debut as a deliberate step down from the planned $10B deal for the sake of conservatism and follow-on interest. That's a nice story. Maybe they're lowering expectations just in case it doesn't do so well.
Nota bene: I am a heavy user of Facebook but I have no investment in FB at this time.
Thursday, December 15, 2011
Zynga Prepares IPO For Web-Addled Investors
I stayed away from the original dot-com bubble because I couldn't understand how any of the companies hyped in Red Herring, Upside, and other now-defunct industry cheerleading magazines would ever make money. Now a new Internet bubble is ready to carry away all of the investors who got carried away in dot-coms, real estate, CDOs, and other stuff that didn't work out.
Zynga is getting ready to show the world why it deserves a valuation of almost $9B on net income of only $12M. Maybe I should cut Zynga some slack since it apparently made a profit of $400M in 2010 (I'd sure like to know where the WSJ got that number). Tomorrow's IPO will be a sweet deal for the founders once the lockup ends. The company only earns revenue from 3% of its user base. In other words, 97% of Zynga's brand-loyal users get a free ride. I wonder if the percentage of Microsoft Office users worldwide who pirate the software even comes close to 97% of the total market. Microsoft has the pricing advantage of an operating system accepted worldwide as a standard, with enormous switching costs and opportunity costs for businesses wishing to opt out on competing platforms. Online gaming has no switching costs at all. Continuously churning out hot titles is all that matters. The "Angry Birds" company Rovio is now envisioning big paydays from an IPO. Good luck with that. I hope the founders cash out as soon as they're able.
The dot-com bubble should have taught investors about the limits of a business model based heavily on giving away usable content for free. LinkedIn currently trades at a P/E over 900. That is clearly unsustainable. A platform that attracted tons of potential customers with free content will only be able to convert a small number of them to subscribers at a premium price. Investors chasing radical new business models need to know that customers accustomed to getting something for free can easily jump to another free service. This is why Alfidi Capital offers free content to all users. Let freedom ring.
Full disclosure: No positions in any companies mentioned at this time (except of course Alfidi Capital). No intention or desire to participate in any future IPOs of said companies. BTW, Alfidi Capital will never go IPO. No way is anybody ever going to own me.
Zynga is getting ready to show the world why it deserves a valuation of almost $9B on net income of only $12M. Maybe I should cut Zynga some slack since it apparently made a profit of $400M in 2010 (I'd sure like to know where the WSJ got that number). Tomorrow's IPO will be a sweet deal for the founders once the lockup ends. The company only earns revenue from 3% of its user base. In other words, 97% of Zynga's brand-loyal users get a free ride. I wonder if the percentage of Microsoft Office users worldwide who pirate the software even comes close to 97% of the total market. Microsoft has the pricing advantage of an operating system accepted worldwide as a standard, with enormous switching costs and opportunity costs for businesses wishing to opt out on competing platforms. Online gaming has no switching costs at all. Continuously churning out hot titles is all that matters. The "Angry Birds" company Rovio is now envisioning big paydays from an IPO. Good luck with that. I hope the founders cash out as soon as they're able.
The dot-com bubble should have taught investors about the limits of a business model based heavily on giving away usable content for free. LinkedIn currently trades at a P/E over 900. That is clearly unsustainable. A platform that attracted tons of potential customers with free content will only be able to convert a small number of them to subscribers at a premium price. Investors chasing radical new business models need to know that customers accustomed to getting something for free can easily jump to another free service. This is why Alfidi Capital offers free content to all users. Let freedom ring.
Full disclosure: No positions in any companies mentioned at this time (except of course Alfidi Capital). No intention or desire to participate in any future IPOs of said companies. BTW, Alfidi Capital will never go IPO. No way is anybody ever going to own me.
Saturday, July 09, 2011
Just Say No To Groupon's IPO
The Web 2.0 phenomenon is approaching its apotheosis. Sometime between now and the next eurozone debt crisis - like another two months or so - a bunch more Web commerce businesses are likely to go IPO or get bought out. Groupon is one of them. They remind me of Netscape in 1995, which had a hot IPO based on first-mover advantage but had no durable competitive advantage that could keep competitors away. Groupon's competitors see a similar opportunity and are lining up to be the next big thing in merchant services.
The new competition is a boon to merchants, who will now have multiple channels for reaching out to customers with shopping incentives. It's ultimately bad for Groupon and all of its copycats because they'll end up copying each other's "services" to seek differentiation. That means they'll end up competing on price, because there's no way they can build brand loyalty without an emotional component in their customer service. That emotional hook is how all of those worthless Wall Street wealth management firms survive despite the universal similarity of their product lines.
Here's a prediction. The IPOs of these online coupon aggregators will tempt larger online megaportals like Yahoo and Google to buy them out at unwarranted premiums just to get a "presence" in this "space." You have to love the lingo these kids use nowadays. The whole trend will turn out the way GeoCities did for Yahoo. Remember GeoCities? I sure do, because I built my first website there in 1998. It cost me nothing, and that's ultimately what GeoCities' business model was worth. Nothing. Yahoo bought GeoCities for $3.57B in 1999 and shut it down ten years later. The same fate awaits most of these online enablers of merchant gizmos. The founders will do quite well; hence the scramble for media attention at this stage.
People desparate to make a quick buck will line up to buy hot Web stocks. Just a few headlines in investment magazines targeting the harried middle class will do the trick every time. Mutual fund managers chase the same hot trends. Nothing has changed since the dot-com era.
The new competition is a boon to merchants, who will now have multiple channels for reaching out to customers with shopping incentives. It's ultimately bad for Groupon and all of its copycats because they'll end up copying each other's "services" to seek differentiation. That means they'll end up competing on price, because there's no way they can build brand loyalty without an emotional component in their customer service. That emotional hook is how all of those worthless Wall Street wealth management firms survive despite the universal similarity of their product lines.
Here's a prediction. The IPOs of these online coupon aggregators will tempt larger online megaportals like Yahoo and Google to buy them out at unwarranted premiums just to get a "presence" in this "space." You have to love the lingo these kids use nowadays. The whole trend will turn out the way GeoCities did for Yahoo. Remember GeoCities? I sure do, because I built my first website there in 1998. It cost me nothing, and that's ultimately what GeoCities' business model was worth. Nothing. Yahoo bought GeoCities for $3.57B in 1999 and shut it down ten years later. The same fate awaits most of these online enablers of merchant gizmos. The founders will do quite well; hence the scramble for media attention at this stage.
People desparate to make a quick buck will line up to buy hot Web stocks. Just a few headlines in investment magazines targeting the harried middle class will do the trick every time. Mutual fund managers chase the same hot trends. Nothing has changed since the dot-com era.
Tuesday, December 21, 2010
Friday, October 23, 2009
IPO Trough Worse Than Dot-Bomb Drought
There is even more reason to believe that this phantom recovery is fake when its IPO revival produces less of a pop than the drought that followed the dot-com implosion:
Investors need to be absolutely certain that they have iron-clad reasons to buy equities given current valuations. Articles like this can reinforce confirmation bias for bears like me, so of course I've also noted that this week's earnings announcements have given the market some positive earnings surprises.
Initial public offerings in the U.S. are suffering the worst returns since at least 1995 at the same time that the stock-market rally is spurring the most new listings in almost two years.
Investors need to be absolutely certain that they have iron-clad reasons to buy equities given current valuations. Articles like this can reinforce confirmation bias for bears like me, so of course I've also noted that this week's earnings announcements have given the market some positive earnings surprises.
Sunday, September 13, 2009
Alfidi Capital Special Report: IPO Filing Price Range Valuations
I've been busy for quite some time working on a very large project, but I have made time to publish a special report on valuation methodologies for IPOs. Check it out at Alfidi Capital.
Thursday, September 03, 2009
Wednesday, August 13, 2008
CVAC Systems: A Disruptive Health Care Technology
I'm always on the lookout for the next big thing, but the trouble with the San Francisco Bay Area is that everybody and his brother claims they can deliver it once you hand them a few million in startup cash. Startup investing is not for the faint of heart and requires thorough due diligence. I have only invested in one startup to date, but I believe I picked a huge winner.
In late 2006 I came across a remarkable startup: CVAC Systems of Temecula, California. The CVAC (pronounced "SEE-vack") acronym stands for Cyclic Variations in Altitude Conditioning. They have engineered a one-person pressure chamber that simulates a high-altitude physical training environment by exerting multiple pressure and temperature changes on the human body. The basic effect is to stimulate the body's production of red blood cells, producing the benefits of high-altitude physical training.
The basic description of this technology's potential effects piqued my curiosity, so I actually drove down to Temecula from SF in October 2006 to check it out for myself. CVAC's inventor, Carl Linton, put me through a 20-minute session in a prototype CVAC pod. Folks, all I can say is that after 20 minutes in that pod I felt like I could have run for ten miles.
I like several things about this company. The CVAC technology's potential applications in enhancing physical fitness and treating metabolic disorders (pending scientific confirmation) offers the possibility of multiple revenue sources once the devices are placed in rehab centers, clinics, fitness clubs, and anywhere else customers can access it.
The company recently released the results of a study by researchers at Stanford University that indicates the potential use of CVAC as a diabetes treatment. This ought to be jaw-dropping, given the size of the diabetes-afflicted population in the U.S.
I put some of my own money into this company in February 2007 because I was convinced that this company's technology will be as disruptive to the health care industry as the Palm Pilot (PALM) was to mobile communication devices. I have complete confidence in the ability of CEO Allen Ruszkowski and his team's entrepreneurial vigor.
In a side note, Johnson & Johnson's (JNJ) latest quarterly earnings held up very well. Why mention this here? Medical device companies are considered defensive plays in recessions, so device makers may perform well even if the U.S. economy continues to stall in the near future. This is a potential feather in CVAC's cap if they go IPO between now and 2011 or so, because reliable share price performance from comparable peers in their sector will make it easier to price their own shares.
I remain convinced that CVAC is a winner. If anybody else can show me a startup with similar potential for multiple revenue streams and monopolistic pricing power, I'm all ears.
Nota bene: Anthony J. Alfidi holds a small private stake in CVAC Systems Inc. This company is privately held and represents a high-risk opportunity typically limited to institutional investors and accredited investors as defined by the SEC.
In late 2006 I came across a remarkable startup: CVAC Systems of Temecula, California. The CVAC (pronounced "SEE-vack") acronym stands for Cyclic Variations in Altitude Conditioning. They have engineered a one-person pressure chamber that simulates a high-altitude physical training environment by exerting multiple pressure and temperature changes on the human body. The basic effect is to stimulate the body's production of red blood cells, producing the benefits of high-altitude physical training.
The basic description of this technology's potential effects piqued my curiosity, so I actually drove down to Temecula from SF in October 2006 to check it out for myself. CVAC's inventor, Carl Linton, put me through a 20-minute session in a prototype CVAC pod. Folks, all I can say is that after 20 minutes in that pod I felt like I could have run for ten miles.
I like several things about this company. The CVAC technology's potential applications in enhancing physical fitness and treating metabolic disorders (pending scientific confirmation) offers the possibility of multiple revenue sources once the devices are placed in rehab centers, clinics, fitness clubs, and anywhere else customers can access it.
The company recently released the results of a study by researchers at Stanford University that indicates the potential use of CVAC as a diabetes treatment. This ought to be jaw-dropping, given the size of the diabetes-afflicted population in the U.S.
I put some of my own money into this company in February 2007 because I was convinced that this company's technology will be as disruptive to the health care industry as the Palm Pilot (PALM) was to mobile communication devices. I have complete confidence in the ability of CEO Allen Ruszkowski and his team's entrepreneurial vigor.
In a side note, Johnson & Johnson's (JNJ) latest quarterly earnings held up very well. Why mention this here? Medical device companies are considered defensive plays in recessions, so device makers may perform well even if the U.S. economy continues to stall in the near future. This is a potential feather in CVAC's cap if they go IPO between now and 2011 or so, because reliable share price performance from comparable peers in their sector will make it easier to price their own shares.
I remain convinced that CVAC is a winner. If anybody else can show me a startup with similar potential for multiple revenue streams and monopolistic pricing power, I'm all ears.
Nota bene: Anthony J. Alfidi holds a small private stake in CVAC Systems Inc. This company is privately held and represents a high-risk opportunity typically limited to institutional investors and accredited investors as defined by the SEC.
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