IPO

  • 11 Mar 2013 at 10:29 AM
  • IPO

Bankrupt 1990s Internet Toy Company Still Thinks It Was Undervalued

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To get a sense of how old the Goldman Sachs IPO lawsuit-and-maybe-scandal that Joe Nocera and Felix Salmon wrote about this weekend is, consider this: the alleged victim was a company named eToys. With the “e,” and the “Toys,” and the weird capitalization. Also Henry Blodget was the analyst who covered them at Merrill. Different times!

Nocera gives the basic facts and there’s something a little off about them:

The eToys initial public offering [in May 1999] raised $164 million [at $20/share], a nice chunk of change for a two-year-old company. But it wasn’t even close to the $600 million-plus the company could have raised if the offering price had more realistically reflected the intense demand for eToys shares. The firm that underwrote the I.P.O. — and effectively set the $20 price — was Goldman Sachs.

After the Internet bubble burst — and eToys, starved for cash, went out of business [in March 2001] — lawyers representing eToys’ creditors’ committee sued Goldman Sachs over that I.P.O.

The theory of the lawsuit is that Goldman screwed eToys on behalf of investors, pricing the IPO at $20 per share, rather than the $78 justified by demand, as evidenced by the fact that the stock briefly traded at $78 on the first day. An alternative theory is that Goldman screwed investors on behalf of eToys, pricing the IPO at $20 per share, rather than the $0 justified by fundamental value, as evidenced by the fact that the company went out of business 22 months after the IPO. Also it was called eToys come on. Read more »

  • 10 Aug 2012 at 5:44 PM
  • IPO

Manchester United IPO Goes Nowhere In Exciting Fashion

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I am the world’s worst technical analyst but even I can spot a support level:

Or, as the Journal puts it, “English soccer club Manchester United’s stock didn’t rise much but didn’t fall either as it made its market debut Friday.”

This is not the first Friday afternoon where we’ve played “guess the stabilization strategy of an overhyped IPO,” which, God, we need to find something better to do with our Friday afternoons. Last time it was Facebook, and we noticed some things, like that about 43mm shares had traded right exactly at the IPO price, and like that almost all of them traded at the bid. We guessed at the time that most of those shares had been bought by the underwriters, eating into the greenshoe that allowed them to support the deal. But since that greenshoe was 63mm shares, they started the weekend still short some 20mm shares – and when Facebook opened way below the IPO price on Monday, they made shitloads of money.*

Jefferies et al. are determined not to repeat that mistake:** Read more »

  • 15 May 2012 at 5:26 PM
  • IPO

Facebook Attracting Children, Retirees, Not Advertisers

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A wonderful thing about the Facebook IPO is that there is a proliferation of imaginary markets in which to … well, not trade it exactly, but say what you would be doing if you could trade it, which is almost as good. Here is the Wall Street Journal’s imaginary market, with a “Current Price Prediction” of $52.43, off a touch from the $150.13 as of … yesterday. Admire their specificity! Elsewhere you get only binaries, or I guess ternaries, like CNBC’s “Do You Think Buying Facebook Shares Would Be a Good Investment?” [yes / no / don't know], or Felix Salmon’s “Are you seriously thinking of buying Facebook shares?” [yes / no / umm, I'm buying them for a friend].

In the imaginary market that counts (I guess?), Facebook is up “an average of 14 percent” (!) as the underwriters raised the IPO range from $28-$35 to $34-$38 in a refiled S-1 this morning. This is good news if you bought in the imaginary market at $28-$35, as I suppose the underwriters imaginarily did, and also good news if you avoided the real market when it last cleared north of $44, as this guy who’s pissing away his child’s college money on Facebook did. If you like numbers, you could look at these numbers*: Read more »

  • 21 Sep 2007 at 3:23 PM
  • IPO

Bear Markets Wear Prada

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PradaIPO.jpgUh-oh. For the fourth time in a decade, Prada is considering an IPO, according to Bloomberg. We remember all too well the last time this happened—in 2002. The markets promptly the beat a hasty retreat—five years backward, to 1997 levels. The dollar declined to historic lows against the euro.
Prada blames the declining markets for their cancelled IPOs but would be investors are lucky they were scrapped. When the company first considered a public offering, analysts valued it at as much as 8 billion euros. Now they’re saying it’s worth between 3 and 4 billion. As Portfolio’s Felix Salmon points out, This decline came at a time when the 14-member Bloomberg European Fashion Index has more than doubled since 2002.
So what happened? To begin with, Prada made two costly acquisitions in 1999 that now look like serious mistakes.
“Jil Sander and Helmut Lang were disasters for Prada,” Fashionista’s Faran Krentcil tells us.
Another challenge has been the crowding of the market niche that Prada once dominated. The list of Prada competitors is far longer than it was in 2001. Brands like Burberry, Marni, and Marc have all made huge strides in what our Fashionista sisters call “quirky chic”
“Prada used to own that aesthetic,” Faran says.
Prada Seeking Advisers for Luxury IPO, People Say [Bloomberg]
Prada’s Underperformance [Portfolio]

  • 08 Aug 2007 at 10:45 AM
  • IPO

The Terrorists Win Anyway (Rain or Shine)

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If the terrorists lose, ICx Technologies may go out of business, which means the terrorists win. There is no jihad against paradoxes.
ICx is planning a $184 million IPO, according to an S-1 filed yesterday. The homeland security company develops sensing technologies for government agencies and corporations like FedEx and Disney.
How candid can a homeland security company be in an SEC filing? From the looks of it, not very. In the “Growth Strategy” section of the S-1, nowhere does ICx list, “maintaining a constant state of fear” or “the increased rate of things blowing up.” ICx also refuses to acknowledge the risk to ongoing operations that “things may stop blowing up.”
Instead, the closest ICx gets to admitting that it relies on a thoroughly terrorized populace is here:

Our ability to grow will depend in part on the rate at which markets for our products develop and on our ability to adapt to emerging demands in these markets. In particular, our business depends on our ability to offer a broader range of products and services to meet demand for integrated solutions. In addition, geopolitical developments, terrorist attacks and government mandates may cause sharp fluctuations in the demand for our products.

Translation – if you’re long on big explosions, you’re long on ICx. No one is denying the need for basic security (and increased security in certain obvious places, like U.S. ports), but the real question is whether we want a thriving homeland security market in the corporate and private sector, one in which every Disney store needs bomb detection. Do we want ICx to succeed in the first place? Are we long on terror, and will there ever be a time in which an unexpected surge in the share prices of homeland security companies suggest imminent attacks (terrorist insider trading)?
Lehman is lead underwriter on the IPO with Goldman, JPMorgan, Morgan Keegan and Needham & Co. acting as not-quite-so-lead underwriters. The company is planning to trade on the Nasdaq under the ticker ICXT.
ICx Technologies Plans IPO [Forbes]
ICx S-1 [SEC]

  • 11 Jul 2007 at 10:45 AM
  • IPO

Voltaire proving that optimism is a mania for maintaining all that is well when things are going badly

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voltaire.jpg It appears that the multitude of markets is making us ignorant. Even tiny unprofitable tech companies are trying to take advantage of the fervor in the (public) equity markets.
Voltaire, a networking equipment company based in Herzeliya, Israel and Billerica, MA, filed for an IPO in which the company expects to raise $67.5 million. Voltaire hopes that when it is a question of money, everybody is of the same religion, and that investors will overlook the fact that net losses are ramping up faster than revenue and that the company is based in Israel (is that a legitimate discountable risk these days?). Voltaire dismisses this criticism, commenting that “investors always speak badly when they have nothing to say.”
Voltaire does worry that “the longer analysts dwell on our misfortunes, the greater is their power to harm us,” but has confidence that common sense is not so common, and that investors will overlook any operational red flags and buy in to the IPO. The company plans to sell 5.77 million shares at a target price of $12 to $14 per share and trade on the Nasdaq under the ticker “VOLT.”
Voltaire is candide about the risks it faces in the future, and of the illusory, often metaphysical nature of most company reporting. The company adds as a risk factor in its S-1, “everything’s fine today, that is our illusion,” knowing that it is not enough to conquer the networking equipment market, one must also know how to seduce it.
Voltaire insists that is not responsible for perpetuating any sort Web 2.0 bubble but also muses that no snowflake in an avalanche ever feels responsible. Since business is the salt of life, Voltaire enters the public markets making but one prayer to God, a very short one: “O Lord, make my shareholders ridiculous.” We will see if he grants it.
InfiniBand backer files for IPO [CNET via DealBook]

The Wizard of OZ Heads for IPO

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Och-Ziff Capital Management filed for a $2 billion initial public offering today, becoming the latest alternative asset management group to sell equity to the investing public.
One question that keeps arising when these offerings are discussed is whether it makes sense for an outsider to get in on a business that the insiders are getting out of. Och-Ziff has a strong reply: they aren’t getting out. In fact, they promise to re-invest the proceeds from the IPO in Och-Ziff funds, with a mandatory five-year lock-up.
We can’t help wonder if there’s not some kind of tax arbitrage behind this scheme. With plans afoot on Capitol Hill to tax hedge fund and private equity partnerships as corporations, this move might allow the owners of Och-Ziff to convert some of their carried-interest into investment capital subject to capital gains taxes.
The firm will remain under the tight control of founder Daniel Och. The current owners will control a majority of the voting rights, and they will sign an agreement giving Och an irrevocable proxy to vote their shares. The Wall Street Journal notes that Market Beat notes the fate of the fund is very much tied to Och himself. Investors in its funds are “entitled to a ‘one-time special redemption right’ allowing them to cash out of the fund if Mr. Och is unexpectedly unavailable to the firm for 90 days for any reason — death, disability, alien abuduction, whatever ,” according to Market Beat.
The role of Goldman Sachs as a lead underwriter of the IPO has prompted Deal Journal’s Dana Cimilluca to put forward something of nepotism theory to explain why Goldman has been landing lead roles in the big hedge fund IPOs but missing out on the private equity offerings.

At Och-Ziff…three of seven executive officers and directors listed in the SEC filing heralding the deal have Goldman on their resume. They include co-founder Daniel Och, who spent more than 11 years at Goldman before starting the eponymous investment firm in 1994. According to the filing, he was in Goldman’s Risk Arbitrage department and later ran proprietary trading in equities and was co-head of U.S. stock trading. At Fortress, the hedge fund and private-equity firm that started the present U.S. trend of alternative asset managers going public in February, three of its 12 chieftains are old Goldmanites.
Meanwhile, Goldman isn’t mentioned anywhere in the section of the Blackstone IPO prospectus that discusses the backgrounds of its 10 honchos, and KKR’s founders are all Bear Stearns alumni.

A yet unremarked connection between the Blackstone IPO and the Och-Ziff IPO is the role of Skadden Arps corporate finance partner, Jennifer Bensch. On Blackstone, Bensch was listed as the second partner at Skadden (who acted as outside counsel to Blackstone) working on the transaction. She’s in the same position in the Och-Ziff IPO. From our experience with big law firms, the placement of law firm partners usually works like this: the first name has the client relationship, and the second name does the work. This raises the possibility that Bensch may be the legal brain at the center of the recent push into the public capital markets by hedge funds and private equity firms. Bensch could not be reached for comment.
IPO Prospectus [SEC]
Och-Ziff Capital Hedge Fund Files for $2 Billion IPO [Bloomberg]
Midday Tidbits: Doc Och [Market Beat]
Goldman’s Hedge Fund Alumni Network [Deal Journal]

  • 27 Jun 2007 at 2:22 PM
  • IPO

Second Largest SPAC Ever, Best Management Team Ever

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quayle.jpg For the first time ever, the words “former VP Dan Quayle and former Notre Dame football coach Lou Holtz,” are not the setup to a joke (punchline – because I just gave the lineman a potatoe). Instead Dan & Lou, and CEO of K2 Richard Heckmann, are planning to raise up to $500mm for a SPAC (Special Purpose Acquisition Company). Heckmann is planning on leaving K2 by August 1.
SPACs are publicly raised entities that provide a virtual blank check for a management company to make an acquisition. The acquisition doesn’t have to specified beforehand, although there are strict limits on when a target must be designated, and when a SPAC needs to spring into action (or else it would be the greatest scam ever). Why investors would want to give Quayle and Holtz a blank check is anyone’s guess. I guess a few companies could use more heart and less brains (Quayle plans to make “Rudy” a managing director).
The largest SPAC is Freedom Acquisition Holdings, which raised $528mm last Decemember. SPACs have raised $4.1bn in 33 IPOs this year, taking advantage of the blank check fervor created by the planned and executed IPOs of hedge and PE funds.
Quayle has been busy as chairman of the global investment unit at Cerberus since 1999 and Holtz has been saying nonsensical things on ESPN since retirement.
Quayle joins ‘blank check’ firm’s IPO [Los Angeles Times]

BX: The Opposite of Up

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blackstoneiposecondayfirstdaypopletdisapointingipoperformancedownwarddowndowndown.JPGBlackstone closed at $30.75 yesterday, down 5.2% for the day and below its $31 initial offering on Friday; shares fell to $30.48 during pre-market trading. This is embarrassing. Nobody (here) knows for certain why life is being so god damn unfair to Stephen Schwarzman, 5’6”, but perhaps it could have to do with the Schwarz’s outrageous pay package, the nebulous amount of disclosure about the actual content of the Blackstone funds, or the fact that equity investors haven’t been duped into thinking they are LPs.
This also might have something to do with it:

One particularly risqué segment posed a personnel problem more pressing than a potential shunning at Shinnecock. “The kid, Dylan, was either going to hump a chair or hump the nanny’s leg,” Holly [Peterson, Peter’s daughter] said. “As a mother, I wasn’t going to ask my kids or my friends’ kids to do that.” Hence, the dwarf. Jay [Peterson, Peter’s nephew] recalled, “We thought, why we don’t hire a little person? That should get some good laughs.

For his part, and for Blackstone’s sake, the elder Peterson had the decency (and good sense) to appear embarrassed:

Pete Peterson has been trying to distance himself from the video, saying last week via e-mail that he would never have agreed to lend his apartment had he known that “The Manny” was going to be filmed there, rather than, as he thought, a taped interview of his daughter.”

Within Days, Share Price of Blackstone Is Below $31[New York Times]
Schwarzman Stake Sinks Like Blackstone [New York Post]
Making the Manny [New Yorker]

Blackstone At 30.60

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blackstoneiposecondayfirstdaypopletdisapointingipoperformancedownwarddowndowndown.JPGThe morning after: not always so pretty, is it?
Neither is the morning after the morning after (weekends don’t count in trading land), especially if you’re Stephen Schwarzman. After closing at $35.06 on Friday, Blackstone’s shares fell 7.5% to $32.44. This translated to a loss of about $655 million for The Schwarz, and (we’re assuming) no crab leg salads for a week.
When we started to write this post, BX had fallen to $31.15. It took us a while to find where the edited Crab Hands graphic was on the computer, and by the time it was located, they were down to $30.60. And not that we’re into kicking people when they’re down, but it should also be noted that Goldman Sachs, Merrill Lynch and Bear Stearns are all up (since yesterday’s close, trending with the market), so BX has no one to blame but itself.
Steve’s $655M Bad Day [New York Post]
Blackstone gives up debut gains [Financial Times]

Calling Blackstone’s First Day Performance
And The Winner Is…

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blackstoneiposecondayfirstdaypopletdisapointingipoperformancedownwarddowndowndown.JPGAfter opening with a poplet after its initial public offering on Friday, Blackstone’s stock has been trending downward toward the IPO price. On Friday, we asked DealBreaker readers to guess the price of the shares at close. (A move, we happily confess, was a blatant rip-off of a Market Beat item.)
Reader BB called it with his two PM forecast of a $35.01 close for BX. This was just a nickel short of the actual close of $35.06, making BB the winner according to our Price Is Right rules. We’ll be sending him a copies of Jack and Suzy Welch’s Winning: the Answers and Dana Vachon’s Mergers & Acquisitions. BB requested that we maintain his anonymity.
“I arrived at the $35.01 closing price by a combination of technical analysis and luck,” BB told us. “I noticed that after the initial pop in BX shares the stock sold off rather quickly, dropping from $38 and finally catching a bid around $35. It rallied back to $36, but I suspected another wave of selling before the close and guessed that the stock might hold that $35 level once again. Remembering the old Price is Right strategy, I tacked on a penny to my guess – and bingo: $35.01.”
Click here for a pop-up version of the chart BB used for his winning analysis. Arrow indicates the time the closing price forecast was submitted.