About Me 0108: Making Money Without

Banks increased fees for initial share sales by 62 percent to 5.63 percent
from the lowest level on record, even as the amount that U.S.
companies raised from IPOs decreased by almost half to $16.4 billion
this year, according to Bloomberg data. While the biggest surge
in stocks since the Great Depression revived the IPO market and helped
enrich bankers, almost 40 percent of offerings sold by underwriters in
the second half of 2009 have left buyers with losses, the data show.

… Crunch the numbers: at a $50
billion valuation, with Goldman in the box seat as lead banker to an
IPO and at the rates quoted in 2009, then it could pocket $2.8 billion
gross in fees. And that’s on top of whatever it creams off the $1.5
billion fund it is creating as part of the deal that sees it currently
investing $450 million. Assuming an IPO in the next 12 months then by
my reckoning, Goldman’s ‘investment’ nets a 6x return.

If Goldman is successful (and
remember that the Special Purpose Vehicle covering the $1.5 billion has
to get past the SEC first but honestly – do they care?) then what
happens to the Twitter’s of this world? Does its investors start
clamoring for an exit? You bet.

That can only spell one thing: bubble times are here again.

Ya Damn skippy, sailor. Howlett hit it right on the head. What type
of revenues, profits and growth justify a $50 billion valuation for a
very young, private company with sparse net cash flows? The type that
are marketed by those who are doing God’s work! now, let’s build on Mr.
Howlett’s and Dignan’s ideas the BoomBustBlog way. We shall begin with
the $1.5 billion dollar fund that Mr. Howlett alleges GS is creating
around the Facebook cash injection. Yesterday’s BoomBustBlog rticle, Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
clearly detailed why and how many of these private equity and client
funds routinely gut investors (we’re talking up to 92% in losses!) while
Goldman (and other GPs) still walk away with profits (see Even With Clawbacks, the House Always Wins in Private Equity Funds). I have posted the model that illustrates this bank wins, investor loses phenomenon as a live spreadsheet online for all paying BoomBustBlog subscribers
to use at will. It’s quite the comprehensive model and allows for the
user to run a myriad of their own assumptions using any inputs they
please. As subscribers will see, it is nearly impossible for Goldman to
lose money on their Facebook private fund, no matter how badly Facebook
shares perform. Please beware that is unlocked and fairly complex, so
please do not make any formulae changes to it for it corrupts the
experience for other users. Here is an excerpt for those who do
subscribe to our research and services, YET!

Even with the fund taking 45%+ losses and the LP (limited partners,
ex. Goldman’s clients) losing every last single dime, Goldman easily
pulls a 33% return. God forbid Facebook share actually do well,
Goldman’s numbers look… Well… Damn near illegal! Almost as if they can
pump up a price without any fundamental justification or public
disclosure of financials and still sell it retail to the public. Of
course, such a thing could and would never occur – not with the every
vigilant SEC to take our backs. Excuse me while a cough a up a lung from
laughter…

You see, this is the dirty little secret of private equity funds.
They are not in the business of investing money for client’s maximum
risk adjusted return. They are in the business of collecting fees. Those
poor innocent (or not so, particularly when they are investing their
clients monies, hence are in the same business) souls that actually
believe as the commenter above quoted “Wow!!! If Goldman is putting their money in this, it must be serious!”simply
the lamb being led to the private equity/IPO slaughterhouse. You see,
there is no loss to GS – no matter how high they bid up the valuation
nor how hard it comes crashing down. This gives them the incentive to
shoot for the sky with the private equity deal, because when the IPO
breaks, its bonuses bigger than nearly any have ever seen. Facebook
makes and excellent marketing story as well. Boy Wunderkind CEO, a
product nearly everyone uses and loves, and a mysterious dearth of
business model to give it a mystical effect. Don’t forget the
involvement of the “cream of the crop” of Wall Street banks, whose
bankers, traders and analysts are all so much smarter than us guys from
Brooklyn. Add this up, and you get “Wow!!! If Goldman is putting their money in this, it must be serious!”.

I will continue this in a few hours via my next article that
illustrates an actual Facebook offering, complete with valuations –
which should be a doozy, Wait until we get to add up all of those
Goldman fees – Facebook investors win or lose. Just to be clear, this is
not hate for Goldman, but elucidation and clarification regarding
exactly what business Goldman, et. al. are actually in and how they are
able to generate the profits that they do. Many think that Goldman is
the best and brightest on the Street. Those guys went to the same
schools, studied under the same teachers, graduated and employed using
the same strategies trading the same products as everybody else. Get
over the mysticism marketing bullshit and you just have a politically
connect, very well marketed investment bank that was just bailed out by
the government. The same as every major IB in this country. I have no
hate (nor love, for that matter) for Goldman but I am about setting the
record straight. If you really think Goldman is really that good at
anything outside of raking profits off the back of their clients, I
suggest you take a long, strong look at their track record versus mine - Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?

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The Middle East’s largest online auction and buying site has decided auctions are so last decade.

From the beginning of 2011 sellers won’t get the option to sell their products in an auction. It’s fixed price, or none at all.

The decision comes as a shock to many as Souq.com, which opened its doors to the public in 2005 and has since launched in 5 countries in the region, has always been portrayed as the eBay of the Middle East. At least in terms of online auctions, not anymore.

“We (and most of our sellers) want to offer the best online shopping experience to users in the region, and this is one step along the way to support this goal.” said CEO and Founder of Souq.com Ronaldo Mouchawar in an email about the recent shift.

This change, as most in life, will have its supporters and detractors. The good thing is, it looks like a only slim minority might end up annoyed.

To illustrate the above, lets say you’re a painter and you work from home during your spare time. I’m one of those who believe art has no price, but since it’s good to have paint to create priceless masterpieces, putting the occasional price tag on your work isn’t entirely evil. The only problem with that is how do you put a price tag on art in the first place? Van Gough considered giving money for art is as important as being an artist yourself. That’s where auctions come in strong.

By putting up a painting to sell through an auction, the seller allows the highest bidder to give her as much it takes to win the auction, or otherwise ask to ‘Buy Now’ according to a price the seller sets. Will this shift be good for those who realistically don’t know how much their work is worth? I would say no.

On the flip-side regional retail stores tend to invest large amounts of money to put their products online on their own, and usually fail miserably. Many factors come into play, but the most obvious are a large user base and an easy to use website to buy from.

This encouraged Souq.com to build a platform for merchants and retail stores to offer their products on Souq through fixed prices (almost all the time), and through Souq Stores which are customizable online outlets for retailers such as UAE’s
surface encounters surface encounters macomb

Thursday, January 6, 2011

Making Money Without

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