Daily Investment Tips

AIG and US government are offering to sell a total of 300 million AIG shares to the public. AIG and the government didn’t specify a price for the shares in a regulatory filing on Wednesday. But 300 million shares of AIG were worth about $8.89 billion at Tuesday’s closing price of $29.62.

The filing says AIG is offering 100 million shares for sale and the Treasury is offering 200 million shares.

AIG and governement did not give a tentative date for the stock offer.

written by Constantine Njeru \\ tags: 100 Million, Aig, Closing Price, Offer Price, Shares, Stock Price, Treasury

Pandora Media, the internet radio station has just announced plans of an IPO. Pandora has filed to raise up to $100 million in an IPO.

Pandora IPO Price

Pandora did not reveal the IPO price range or the number of shares it plans to sell in the IPO. We only know for now is they plan to raise $100 million.

Pandora IPO date

Barring any regulatory hiccups the IPO coud happen in the second half of 2011.

Pandora Financial Statements 2010/2011

• The company generates most of its revenue from advertising, while also offering a subscription service to listeners.
• Pandora, has over 80 million registered users.
• The company posted a net loss of $16.8 million in 2010
• Revenues of $90 million through the first three quarters of 2011. With a loss of $328,000.
• Pandora said it expects to incur annual operating losses at least through fiscal 2012.

written by Constantine Njeru \\ tags: 100 Million, Financial Statements, Hiccups, Internet Radio Station, Ipo Price Range, Listeners, Losses, Pandora, Second Half, Subscription Service, Three Quarters

According to an article in deal book NYTimes there are 22 companies in the tech I.P.O. pipeline for 2011.

The five Tech IPOs 2011 to watch out for are internet sensations Facebook, Zynga, Groupon, Linked and Skype.

Non of these companies have confirmed going for a tech IPOs in 2011 but going by the level of public and  investor interest in these five the IPOs are around the corner.

For Facebook, Zynga, Linked and Groupon one factor showing a tech IPO 2011 is the significant demand for these companies stock  in the secondary markets, private exchanges that match buyers and sellers.

Facebook one of Tech IPOs 2011

Facebook has crossed 500 million members mark and reportedly bringing near $2 billion revenues for 2010. In private exchanges Facebook is now valued at $45 Billion.

Zynga one of Tech IPOs 2011

Zynga is heavily tied to Facebook. The company raised more money in 2010 from the likes of Google. Word out there is annual revenues are above $800 million. The demand for Zynga stock in the private market has remained strong.A zynga tech IPO in 2011 is not unthinkable.

Groupon one of tech Ipos 2011

As 2010 came close to an end Google unsuccssefully tried to buy Groupon. Groupon is now negotiating with Fidelity, T. Rowe Price and Morgan Stanley for another round of financing that could be as large as $950 million. With this investors looking forward to an exit strategy groupon could go for a tech Ipo in 2011.

Linked one of Tech IPOS 2011.

Although Linked is below the radar when it comes to news coverage, early investors eventual will want an exit. If Facebook, Zynga or groupon have a spectacular tech IPO in 2011, Linked will be hot on their heels.

SKYPE one of Tech IPOS in 2011.

Skype is the only one that has confirmed a 2011 tech ipo. On August 9, 2010, Skype filed with the SEC to raise up to $100 million in an initial public offering

written by Constantine Njeru \\ tags: 100 Million, Buyers And Sellers, Exit Strategy, Facebook, Fidelity, Google, Initial Public Offering, Investor Interest, Ipo, Ipos, Members Mark, Morgan Stanley, Pipeline, Private Exchanges, Private Market, Radar, Secondary Markets, Sensations, Skype, T Rowe Price

Stephen Schwarzman of Blackstone group, a private equity firm. Schwarzman co-founded Blackstone Blackstone in 1985, with $400,000 seed capital. As of today Blackstone group has a market capital of over $38 Billion.

How has Stephen Schwarzman made so much money? DEBT!

Stephen Schwarzman strategy of making money is to is to use other peoples money to buy companies.

The following is a standard, textbook example that Stephen Schwarzman has designed to perfection:-

Suppose a company makes an annual profit of 10 million USD and is acquired by a private equity firm for 100 million USD, that is, at a price earnings ratio of 10, meaning that the private equity firm is willing to pay 10 times the company’s annual profit. To acquire the company the private equity firm invests 30 million USD of its own capital borrowing the remaining 70 million USD.

Now suppose that three years later the company still makes a profit of 10 million USD per year. The private equity firm has used the profits to repay 30 million USD of the loan (I’m abstracting from taxes here) and decides to sell the company for the same price as it has bought it, that is, 100 million USD. This may seem like a bad deal, but take a closer look at what happens. The private equity firm uses 40 million USD to repay the remainder of the loan and is left with 60 million USD. Thus, in three years the firm has doubled its initial investment of 30 million USD!

If the private equity firm manages to reduce costs and increase the company’s annual profits to 16 million USD, to keep things simple, and sells it again with a price earnings ratio of 10, that is, for 160 million USD, the profit for the private equity firm is 90 million USD (after repaying the 70 million USD loan), three times the initial investment. If, because of the increase in profits, it can convince buyers of a higher price earnings ratio, it will earn even more.

So, in this simplified example, regardless of whether the company being acquired is “turned around”, the private equity firm makes a substantial profit on its investment. The reason? Its ability to finance part of acquisition with debt.

Source Courtesy of Ivar Hagendoorn private equity

written by Constantine Njeru \\ tags: 10 Million, 100 Million, 30 Million, 60 Million, Blackstone Group, Closer Look, Initial Investment, Investment Group, Investment Strategy, Making Money, Money Debt, Much Money, Price Earnings Ratio, Private Equity Firm, Profits, Remainder, Seed Capital, Stephen Schwarzman, Textbook Example, Three Times