Tuesday, November 20. 2012
News today that HP is asserting Autonomy had dodgy finances - FT articles the travails:
The struggling US technology conglomerate has alleged that “serious” accounting improprieties at the British software company were responsible for more than $5bn of the writedown.
Whether there was dodgy dealing or not, all you need to know about the Autonomy/HP Brouhaha is contained in these 2 paragraphs from Jonathan Weil at Bloomberg:
HP said in its 2011 annual report that it paid $11 billion for Autonomy, a software company based in Cambridge, England. In connection with the acquisition, HP initially recorded $6.6 billion of goodwill and $4.6 billion of other intangible assets. HP later revised the goodwill to $6.9 billion and reduced other intangibles by about $300 million, according to its most recent quarterly report.
When you are valuing your $11 bilion purchase at 2/3 Goodwill and your market cap is only c $28bn, you have not just overpaid, you have overpaid ludicrously on a big bet, and it will really hurt if things go wrong...I didn't write about this deal at the time, I saw it as yet another typical Bubbletime deal, and I felt I'd been writing a continual litany on large desperate corporates overpaying for less-than-meets-the-eye-but very-cool small companies (that they believe they can add value to, despite all the historical evidence) for the past year or so.
It would appear that all the HP Board bar one were in situ at the time. Be interesting to see which heads roll.....
Friday, September 28. 2012
With Candide, Voltaire trook several hundred pages to satirise the silliness of unthinking optimism. Gillian Tett took a few hundred words in the FT. She was a young and enthusiastic Euro-optimist, her father was a grizzled Euro-cynic. Here is her apology:
...what is also clear is that my father was entirely correct to be cynical in the face of my optimism. So the question I keep asking myself today is, why did so many people (like me) get swept along by the hype – while others (like my Dad) did not? Why was his cynicism a minority view, in a sea of hope?
This sort of explains my complaint from 2006/7, when it was plain that there was a huge problem coming, and nary a peep from the Financial journalism community. I thought they were in the pocket of the Financial industry (as the regulators were), but being mainly "teenage scribblers" (as an earlier Chancellor asserted) who had never seen anything like it is alao a reasonable analysis. But teh real question is "what are the lessons" to avoid unwarranted optimism?
So what are the lessons? One is that it shows the value of retaining older people – or at least, a diversity of life experience – in the workforce. If nothing else, a range of ages helps guard against group-think. Another moral is that it shows the value of having some people from “real” businesses sitting in the corridors of power: handling widgets or running small companies is a good reality check. But perhaps the biggest lesson of all, which journalists, financiers and politicians should all have posted up on their desks, is how wrong we can sometimes be, especially when we are excited by a “cause”.
These lessons are as valid for Technology as Finance, of course - which is why I wrote about it. So if I may abstract, here are...
The 5 Lessons to Guard Against Irrational Optimism.
Run for the hills if:
1. If the issue is a "cause" with a "belief system" rather than based on any hard data
Otherwise, your only hope is to pray "Apres Moi le Deluge"
Friday, September 21. 2012
In late 1999 you couldn't move in San Fancisco's South of Market St area (SoMA) without tripping over a dot-commer. By late 2001 you couldn't move without tripping over derelict cardboard boxes and winos (I was there both times....). Now the Bubbletime seems to be in full swing again - San Francisco magazine:
I'm sure I could probably find the same breathless-yet-anxious prose in Red Herring or similar in 1999. Now there is probably a long term restructuring going on, as for a variety of reasons the Smart Young Things are gravitating to cities rather than campus complexes, but not this fast. Next will come the sky high rentals and deteriorating services for families moving in*. Those who cannot remember the past etc....
(*Hint. Property prices collapse as well as rise....)
Sunday, September 2. 2012
Facebook 100 days after IPO. Zynga and Groupn have crashed too. Linked In is fine, as is Google and the overall NASDAQ (Data: Yahoo Finance)
100 days on, and Facebook share price has crashed c 40% from its IPO, It joins Zynga and Groupon in a downward plunge (see sheet above).
Nowadays of course everyone knew it was overvalued, but beforehands many were saying it was a snip at its IPO valuation. We were one of the few who didn't and were called "analyst heroes" because of it. But, as Henry Blodgett points out, all you pretty much needed to do was read the prospectus, and Mark Zuckerberg's letter, and it was easy to figure out.:
Didn't anyone even read Facebook's IPO prospectus? The answer, I can only assume, is "no." Because if anyone had read the Facebook IPO prospectus, they would have learned, among other things, the following:
I agree, most of what you needed to know was right there, it wasn't rocket science - but of course, in the Bubbletime the only way is up!
Which makes me wonder what all those analysts who were forecasting $100m valuations and up were doing, exactly. Or, whether the reforms since 2001, that were supposed to make analysts independent, have worked at all?
Thursday, June 7. 2012
Stock Prices of $FB, $GRPN, $LNKD, $ZNGA since Facebook IPO. Chart from Google
News today that NASDAQ is going to compensate traders for its system glitches during the Facebook IPO to the tune of $40m (Sharecast via Yahoo):
LONDON (ShareCast) - Nasdaq OMX Group has decided to return 40 million dollars to those brokers whose orders were mishandled in Facebook's initial public offering (IPO) due to technical errors. Specifically, the US stock exchange operator said it will pay $13.7m in cash and the remaining amount would be credited via lower trading fees for those brokers that were affected. A series of glitches when Facebook went public delayed the start of trade by half an hour and left many trades unexecuted.
The traders are still not happy though. But, given the drastic reduction in the Facebook share price (down 30% in a flat market over the period), and the Great Social Media Selloff overall (see chart above), you'd think that these pension funds etc would offer to pay NASDAQ in gratitude, for preventing them from buying even more of a tanking stock at even dumber prices.
Wednesday, June 6. 2012
Just when we were despairing that the Social Media bubble had fully deflated, thanks to Facebook, we find it may just have moved, to Crowdsourcing - Liz Gannes:
Kickstarter may be the best-known brand in crowdfunding, but Indiegogo now has the biggest war chest. In a new round announced today, Indiegogo now has the backing of Insight Venture Partners and Khosla Ventures. Along with previous investors, the firms provided $15 million in Series A funding for Indiegogo, adding to $1.5 million raised last year. (Kickstarter raised $10 million in 2011.)
The site levies a 4% fee for successful campaigns, for campaigns that fail to raise their target amount, users have the option of either refunding all money to their contributors at no charge or keeping all money raised but with a 9% fee. Assuming an average 5% fee, and say that it has 33% net margins ongoing, that means that just to get the $16.5m investment cash back assumes that it has to make nearly $1bn in total turnover, in the VC exit timescale of say c 5 years. No pressure there then*.....
That, and the low barriers to entry (think Incubator 2.0) plus (we will bet) other VC or offset-funded "me toos" coming in with lower fee % rakes, will make this an "interesting" sector going forward. To the winner the (increasing returns) spoils clearly, but what will the margins look like longer term?
Incidentally, take a look at this excellent satire on the current Bubbleicious Social IPO craze - Ponzify.com. Truly the "undertaking of great advantage; but nobody to know what it is" 2.0
*I agree that a breakeven analysis is not the best way to value a startup, but it is always a decent sanity check as to "what you have to believe"....
Tuesday, May 29. 2012
Has $FB (Facebook) single handely popped the Socia Meedja bubble behind it? Broadstuff Bubble-O-Meter shows it may have
Facebook went below $30 today, on its way to a 25% price drop from float price amidst lawsuits, disgruntled investors etc etc. But we are more interested in what this has done to the whole Social Media bubble we have been watching.
By re-pricing and increasing the number of shares floated to grab every penny that was ever going to be on the table, and then having such a fiasco of an IPO, it may be that Facebook has burst the whole Social Media bubble. Just as all boats rise in an incoming tide, all sink in the great sucking sound of a rapidly retreating one - Zynga et al have all fallen far farther, far faster than Facebook.
But, of far more selfish interest to us is the future of the Broadstuff Bubble-O-meter. Right now it looks like Facebook has also closed the market for future IPOs. In the beginning of May the Social Media space was hyped to the nines. At its height we saw stories of retail investors (aka "suckers") throwing 40-K, School Fee money and various other essential savings into the gamble (Bubble-O-Meter stage 9), but then - instead of a pop and a frothy rush to Stage 10 and a horde of wannabeee SocMed IPOs behind it, there was a slow hissing sound of a bursting bubble, and by end May the Bubble-O-Meter lies spent on the floor, like the previous nights' rubber johnny, leaving a stain of a high watermark that came - and went - in a matter of minutes. One thing is for certain, the bubble ain't going to re-inflate for quite a while (I'd bet a lot on not in 2012, and probably not 12 months) no mattre how hard the Silicon Valley PR machine huffs and puffs.
And so, we are left with large questions - Will Facebook do a Bubble-O-Meter Stage 10 and buy an Old Media darling with a $16 billion war chest? Or how far back has the Bubble-o-Meter fallen? Or maybe both are true, if Facebook took all the loot on the Social Meedja table so there ain't no more for anyone else? In either case, how long will it take to re-inflate the Social Media bubble? Will it ever inflate again - is this it? Will the Silicon Valley economy collapse again? How many of the Silicon Valley Cheerleader blogs will survive? What Phoenix 3.0's will emerge from the ashes? Has Facebook smartly engineered a Big Bubble Bang behind it to ensure no one can follow it out the gate? How much more can we flog the Bubble-o-meter now that the horse has bolted?
At least we can predict the floor for the stock - with $16bn in the kitty, we calculate Facebook shares are worth at least $6!
Postscript - last Friday I gave a talk on the role of hype in bubble formation - as Facebook was IPO'ng - and noted that once the hype peaks and the slide into the Slough of Despond starts, it is a quick fall for a long way, and an irreversible one at that. Lets see if Facebook follows form.
Wednesday, May 23. 2012
With this IPO, even an an old cynic like me eventually thinks "nah, now that could never happen, surely" - it does. SEC enquiries, Class action law suits....Reuters:
My reaction to this was twofold:
Firstly, that there was a lot of very good independent comment out there saying the same thing, so investors who lost their shirts have only themselves to blame.
Secondly, reflecting on my time in the DotCom era, to wonder what - despite all the supposed "improvements" in banking systems in the last decade - has actually changed. Same drivers, same behaviours, same activities, same old same old.
And now there are even people saying the "NASDAQ Glitch" may have been engineered. Right now, I can believe anything.....
Update - US Congressional Committee tolook at IPO - Reuters:
The U.S. House and Senate committees that oversee financial sector matters are planning to look into the issues surrounding Facebook Inc's initial public offering, aides to both committees said on Wednesday.
Tuesday, May 22. 2012
Watching the stock fall, and the fall out from the Facebook IPO Fiasco has been very entertaining, in that never have I seen so many vested (or would that be invested) interests hoisted on such sky high petards:
And now the Regulator is getting interested in that selective disclosure....:
I think times are about to get interesting... this is just the end of the beginning.
Actually, I rather admire Facebook in a perverse way - they used others' predictable greed to rake every penny that anyone was ever going to put on the table into their own trousers, into the biggest war chest ever. They won't need to tap the markets again for ages - probably just as well, the banks won't be laughing.
Still, if you look at the whole Facebook Story of their culture and ethos from Day One, why would one be surprised
Saturday, May 19. 2012
The Facebook IPO really has also been a Tale of 2 Cities - or rather, one city and the Rest Of World. Lets face it, an IPO of this level of hype that sputters, which still forces the under-writers to step in and buy the shares to keep it at the out-the -gate share price, is a Fail. Yet I see many of the Valleyblogs are still faithfully drinking the Kool Aid, while most everyone else is more sanguine - Techmeme records the roster of Kool Aid drinkers and Uh-Oh sayers:
Everything is Rosy through the Kool Aid Lens
John Paczkowski / AllThingsD: - The Price Is Right: Facebook Closes Near Opening Price
Larry Dignan / CNET: - How Facebook's bankers saved an IPO, kept shares above $38
As you can see (with the interesting exceptions of Forbes & TechCrunch), you can define who says what pretty much by closeness to the Facebook epicentre
Incidentally, quite a few of the stories say "observers expected the shares to rise" - I want to know who those observers were, and what they had been drinking over the last few days! They were clearly not reading the newspapers, blogs or financial magazines outside the Kool Aid bubble! (see Tale of 2 Cities - Part 1)
Longer term, pricng it this high really puts the future Facebook under pressure. I think Brent Hoberman's piece in the Guardian said it best - Facebook was "priced for perfection" - meaning they would have to execute perfectly from now on:
The night we went public and raised £120m, Martha and I were very subdued. It felt as if we had the weight of the world, and our employees, on our shoulders, and that the company was priced for perfection. That was massive pressure. However, now I look at Zuckerberg and see someone who really does have the weight of the world on his shoulders, is only 28, and doesn't have a proper business partner.
Update - another SV Pangloss-over on TC on Sunday, my favourite line:
According to the pundits, what really matters is that the stock price didn’t increase in value–or “pop”–post IPO and is being propped up by banks.
Actually, what the (indpendent and knowledgeable) pundits were really noting that what mattered was the underwriting banks were having to come in big time to support the price. Monday should be very interesting....
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