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Archive for August, 2009

Venture-Backed IPOs Still On Hold, But There’s Promise

Posted in Board Of Intellectual Capital, Venture Capital, tagged , , , on August 6, 2009| Leave a Comment »

Here is an excellent article from WSJ venture Blog.

“Should venture capitalists brace for a rebound in the IPO markets?

In a six-week period between May 20 and July 1, four venture capital-backed companies managed to price their initial public offerings, quite a feat considering none had done so in the previous nine months. All four priced at or above the high end of expectations and now trade higher than their pricings.

Sensing the urgency to catch the market while it’s hot (relatively speaking), some venture capital firms have scrambled to get some of their best candidates in shape to file for an IPO, several investment bankers say.

“This environment has led people to start up [the IPO process] again,” said Jeff Becker, managing director with investment bank JMP Securities. “The markets have been strong, and recent IPOs have done well.”

But market observers say start-ups that are ready to go public have already done so, and that the deal pipeline will take months to rebuild.

“For anybody who isn’t already on file… you’re talking four months at the shortest, but likely six months or more” before an IPO could be priced, said Becker, who expects to see more venture-backed IPO filings this year but few pricings before Thanksgiving.

Bryan Pearce, Americas director of the venture capital advisory group at Ernst & Young, said his firm began seeing an uptick in IPO interest from its venture- and PE-backed clients around April.

“I haven’t seen signs yet that we’re going to see the floodgates open, but I think we’re starting to take logs out of the dam and the water’s starting to flow over,” Pearce said.

Pearce predicted that “2010 will be the strong year.” He said technology companies with $50 million or more in revenue should be well-positioned if they have “stability and sustainability of their customer base,” experienced management and dry powder in case the IPO window doesn’t open as expected.

The broader IPO market is far from fully recovered. As of July 31, 16 U.S. offerings totaling about $3 billion had priced this year, down from 46 IPOs totaling $30.2 billion a year earlier, according to data provider Dealogic.

The current IPO market is the worst since early 2003, despite the “incremental increase” in the number of filings over the last couple months, said Richard J. Peterson, director at Standard & Poor’s Markets, Credit & Risk Strategies group.

However, private equity-backed companies appeared to be a bright spot on an otherwise bleak picture. According to Dealogic, seven IPOs by private equity-backed companies (including venture capital) were priced as of July 31 with a total value of $1 billion. While the number is down from $2.7 billion of such offerings in the same 2008 period, it accounted for a bigger percentage of all IPOs that were priced – 33% versus 8%.”

To read the full article, click here.

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Spotify Closing New Financing At €200 Million Valuation; Music Labels Already Shareholders

Posted in Board Of Intellectual Capital, tagged , , , , , , , on August 5, 2009| Leave a Comment »

Here is a piece on Spotify from TechCrunch.

“Has European music startup Spotify finally figured out the online music business? Some big investors seem to think so. Rumors surfaced today that the company is raising a new round of financing of $50 million or so, at valuation of $250 million. We’ve confirmed those rumors from a source close to the company, and have uncovered lots more information about the secretive startup.

First, we’ve confirmed that Asian investor Li Ka-Shing, who invested in Facebook in 2007, will invest in this round, as will a yet to be finalized venture firm. Also, data on previous financings was not completely accurate. Last October there were rumors that the company had raised €15.3 million from Northzone Ventures and Creandum at a €71.6 million pre-money valuation.

In fact, that round was closer to €20 million, and included investments from the big music labels – Universal Music Group, Sony BMG, EMI Music, Warner Music Group. All of the labels, says our source, paid the same price for the stock that the venture capitalists did, other than one label that got in very early. That deal valued the company at €100 million, and secured (as much as possible) the long term support of the big music labels.

The new financing will bring in new “strategic” investors, which include rights holders in other geographic locations, according to our source. And while new investors are balking at the $250 million valuation, strong demand from venture capitalists is supposedly driving this deal to a close.”

Read the full article here.

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Biggest tax revenue drop since 1932

Posted in Board Of Intellectual Capital, boic, tagged , , , , , on August 4, 2009| Leave a Comment »

I have been saying for some time that current deficit projections, even the more realistic Congressional Budget Office projections, are understated owing to overly optimistic forecasts of tax revenue. Now, the data is coming in and it is very bad. California state tax collections will likely be even worse.

Here is an Yahoo article further explaining my point.

“WASHINGTON – The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession’s impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

The last time the government’s revenues were this bleak, the year was 1932 in the midst of the Depression.

“Our tax system is already inadequate to support the promises our government has made,” said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.

“This just adds to the problem.”

While much of Washington is focused on how to pay for new programs such as overhauling health care — at a cost of $1 trillion over the next decade — existing programs are feeling the pinch, too.

Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining.

The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies’ spending by 11 percent in 2010 and military spending by 4 percent.

For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.”

Read the full Yahoo article here.


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U.S. Recession Worst Since Great Depression, Revised Data Show

Posted in Board Of Intellectual Capital, Economy, Gerbsman Partners, Investments, tagged , , , , on August 3, 2009| Leave a Comment »

Here is a goo Bloomberg article.

“Aug. 1 (Bloomberg) — The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.

The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression.

Updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated.

“The current downturn beginning in 2008 is more pronounced,” Steven Landefeld, director of the Commerce Department’s Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said.

Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last year’s fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.

Treasuries, Stocks

Treasuries gained after the GDP report, while stocks closed little changed. Benchmark 10-year note yields dropped to 3.48 percent by the close in New York, from 3.61 percent late the day before. The Standard & Poor’s 500 Stock Index closed at 987.48.

Residential construction fell 21 percent during the period, almost 2 percentage points more than previously reported, aggravating what was already the worst slump since the Great Depression.

The Commerce Department also reported yesterday that the economy contracted at a 1 percent annual rate from April through June after shrinking at a 6.4 percent pace in the first quarter, the most since 1982. The decline in the first three months of the year was previously reported as 5.5 percent.

Recession’s Start

The National Bureau of Economic Research, the arbiter of U.S. business cycles, last year determined the recession started in December 2007. The private group is based in Cambridge, Massachusetts,

Yesterday’s updates are part of comprehensive revisions that take place about every five years and are more extensive than the changes announced at this time each year. Figures as far back as 1929 can be revised.

Over the most recent period, the third quarter of 2008 underwent one of the biggest changes, going from a 0.5 percent decrease in GDP to a 2.7 percent drop. The new reading better illustrates the effect the September collapse of Lehman Brothers Holdings Inc. had on the economy and credit markets.”

Read the full article here.

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