Posts Tagged ‘Distressed assets’

Reading an analysis over the 4 IPO´s this year – OpenTable, Mead Johnson Nutritional, Bridgepoint Educational and Changyou – I came across some new speculations regarding possible IPO´s this year. We covered this topic yesterday as well.

Here is some excerpts from a Wall Street Journal article.

“In particular, the debut of network software firm SolarWinds Inc. last week showed there’s “appetite for untested, unproven, unknown names out there,” says Brenon Daly, a senior financial analyst at The 451 Group.

However, Mr. Daly cautions that few tech newcomers can match the financial strength of SolarWinds, which generated strong revenue and net-income growth in the first quarter, even as many more-established technology companies reported declines.

But he said there could be strong interest in companies such as closely held computer-security outfit Fortinet Inc.; security risk and compliance service provider Qualys Inc.; network performance software company NetQoS Inc., and systems and security management firm BigFix Inc.

A Fortinet spokesman said the company is considering an IPO, as well as other options, but has no definitive plans at this point. A Qualys spokesman said the firm wants to prepare for an IPO by the fall of 2010. NetQoS said it had no immediate plans to go public, “but all options are on the table.”

It continues…

“Another area to watch in the 12 to 18 months is smart-grid technology, which allows for more efficient power distribution, based on where and when demand and supply exist, says Trip Chowdry, managing director of equity research at Global Equities Research.

On her radar screen is closely held DS2, a company based in Spain that provides power-line communications semiconductors.

In the next three years, some cloud computing and enterprise-level mobility technology firms could also be ready for IPOs, she added.

For now, though, the tech environment “continues to be challenging. Investors should look for companies who have a very sticky customer base,” she says.”

Read the full article here.

Please comment on other candidates and I will seek out some info on the topic.

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RGE recently pubsliched a lengthy article on what needs to happen to save tu US banking system. It makes for a good read and I highly recommend it.

“Many important US banks are currently in a dangerous halfway house between public and private, fragile and failed. This is unprecedented in scale, but not in situation. The United States faced a very similar problem with our Savings and Loan crisis of the mid-1980s, Japan and Sweden had systemic banking crises during the 1990s, and a host of less advanced economies have suffered from this type of problem.”

It continues…

“The ongoing accumulation of nonperforming loans and the resulting continued decline in solvency of many American banks has been a significant drag on growth and will only get worse absent government action. Properly capitalized banks will face losses from the recession no matter what, but will not roll over bad loans because they would have enough of their own capital at risk and can bear the costs of writing off bad loans. The costs to the US economy of leaving its financial system undercapitalized are enormous in terms of lost growth, missed investments in new firms and projects (due to the bias towards rolling over old loans to avoid write-offs by undercapitalized banks), and low returns on savings.

The Obama administration has announced that it will do strict examinations of the 20 biggest banks’ balance sheets starting this week. If anything close to current asset values are used to evaluate those books, and they should be, many of these banks will need public capital injections or closure. The reluctance to pull the trigger appears to be based on the fact that such forced write-offs would require the unpopular steps of another injection of public funds and/or round of closures, either way involving government ownership of those banks, a.k.a. nationalization. Failing to be so strict and leaving current shareholders and top management in control will just lead to further losses and repeated suspicions about some banks’ viability, as we saw in the stock market last week.”

Read the full article here.

Others covering this topic: Peterson Institute, Steve Lendman Blog, Institutional Partners and The BaseLine Scenario.

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We wrote about this topic yesterday, the bailout was just a bandaid – the real issue is the fundamentals. The recent stress tests uncovered some uncomfortable truths in regards of cash, GMAC among others might need bailout or face bankruptcy!

The ever so humble (not) Paul Krugman today wrote a good Op-Ed in NY Times. Here are some selected quotes explaining the situation very clearly.

“I won’t weigh in on the debate over the quality of the stress tests themselves, except to repeat what many observers have noted: the regulators didn’t have the resources to make a really careful assessment of the banks’ assets, and in any case they allowed the banks to bargain over what the results would say. A rigorous audit it wasn’t.

But focusing on the process can distract from the larger picture. What we’re really seeing here is a decision on the part of President Obama and his officials to muddle through the financial crisis, hoping that the banks can earn their way back to health.”

He continues;

“After all, right now the banks are lending at high interest rates, while paying virtually no interest on their (government-insured) deposits. Given enough time, the banks could be flush again.

But it’s important to see the strategy for what it is and to understand the risks.

Remember, it was the markets, not the government, that in effect declared the banks undercapitalized. And while market indicators of distrust in banks, like the interest rates on bank bonds and the prices of bank credit-default swaps, have fallen somewhat in recent weeks, they’re still at levels that would have been considered inconceivable before the crisis.

As a result, the odds are that the financial system won’t function normally until the crucial players get much stronger financially than they are now. Yet the Obama administration has decided not to do anything dramatic to recapitalize the banks.

Can the economy recover even with weak banks? Maybe. Banks won’t be expanding credit any time soon, but government-backed lenders have stepped in to fill the gap. The Federal Reserve has expanded its credit by $1.2 trillion over the past year; Fannie Mae and Freddie Mac have become the principal sources of mortgage finance. So maybe we can let the economy fix the banks instead of the other way around.”

Read the full article here.

Others covering this article can be found here: Economists View, Brooks and Krugman, NewsTrust, One Penny Street, Relevant Science.

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Putting cash into unhealthy business has long been understood as a bad deal. With the Bailout programs and the TARP initiative, some might have thought that the problem was solved – think again. Poor business remain poor business.

Here are some good quotes taken from NY Times.

“The results of the bank stress tests have been trickling out for days, from Washington and from Wall Street, and the leaks seem to confirm what many bankers feel in their bones: despite all those bailouts, some of the nation’s largest banks still need more money.

But that does not necessarily mean the banks will get that money from the government. The findings, to be released Thursday by the Obama administration, suggest that the rescue money that Congress has already approved will be enough to fill the gaps. If so, the big bailouts for the banks may be over.But hopes that the tests will be a turning point in this financial crisis electrified Wall Street on Wednesday and some overseas markets the next day. Financial shares soared, lifting the broader American stock market to its highest level in four months. The Dow Jones industrial average rose 101.63, or 1.2 percent, to close at 8,512.28 Wednesday, while Japan’s Nikkei index rose more than 4 percent by midday Thursday.”

Good news indeed, but…

“After news this week that Bank of America and Citigroup would be required to bolster their finances again, word came Wednesday that regulators had determined that Wells Fargo and GMAC, the deeply troubled financial arm of General Motors, would need to do so as well. But regulators decided that American Express, Capital One, Bank of New York Mellon, Goldman Sachs, JPMorgan Chase and MetLife would not need to take action. The official word is due at 5 p.m. Thursday.

The results so far seem to suggest that the 19 institutions that underwent these exams will need less than $100 billion in additional equity to cope with a deep recession, far less than some investors had feared. The question now is, where will banks get that capital?”

Read the full article here.

Other helpful sources on this issue can be found here: Huffington Post, Barrons Blogs, Wall Street Journal, Seeking Alpha, 24/7 WallStreet

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Here is a short piece by way of Smarttrend.

“Invesco (NYSE:IVZ) and billionaire Wilbur Ross are leading a group of investors committing to purchase $1 billion in troubled bank assets through the government’s Public-Private Investment Program. In addition to Invesco and WL Ross (Ross’ investment fund), partners will include the LeFrak Organization, Assured Guaranty Ltd (NYSE:AGO), American Home Mortgage Servicing Inc, Muriel Siebert & Co, Williams Capital Group and Jackson Securities. On Monday Invesco CEO Martin Flanagan said, “The Public-Private Investment Program will help stimulate the mortgage market and provide individual and institutional investors globally with compelling investment opportunities in the legacy securities and legacy loan programs.”

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