Are ‘Public’ Private Equity Firms a Contradiction in Terms?

Corporate takeover, leveraged buyout, alternative asset management, private equity — whichever the popular term-of-the-day happens to be (presently the latter), the current push for private equity (PE) firms to list in the securities market has caused many public investors to turn heads and take notice.

Once famously known for being secluded and enigmatic, the PE industry finds itself now at the front doors of potential shareholders with a welcome cake in its hands and a Cheshire cat-sized smile upon its face.  This may very well be innocent enough, but as newly transformed publicly traded companies, it begs the question: Will these private equity companies change their model to suit the needs of their shareholders or will they continue to do what is best for the limited partners, as they have traditionally done? Or is it possible to appease both types of investors considering their polarizing investment objectives? (more…)

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‘Dutch’ Customs with Familiar Values Make For Unmatched Bedfellows

The act of “going Dutch” implies for one to pay for him/herself (or to provide for one’s own expenses) when in a group setting in order for financial cohesion to exist: The recent actions behind Facebook’s (NASDAQ: FB) less- than- stellar entrance into the market has brought forth the resurgence of a debate that involves the financial and strategic issues found in the traditional initial public offering (IPO) process versus a rather contemporary approach known as a Dutch auction.

Since the presence of online retail brokerages have broadened the ways that companies can raise capital, the need for private companies to go public has diminished.  This is evidenced by the fact that during the Internet Bubble (1996-2000), the average number of IPOs per year was 539 (the average pre-bubble was 520/year), and post-bubble (data from 2001-2008), the average number has dropped to 134 per year, a third of its former size. (more…)

Nestle Stirs Up Baby Formula Market with Pfizer Deal

Nestlé’s (NASDAQOTH: NSRGY) announcement of its acquisition of Pfizer’s (NYSE: PFE) infant nutrition business for $11.9 billion Monday will solidify the Swiss-food giant’s position as the world’s largest provider of baby milk products.

News of Nestle’s nestled-deal sent shares up 1 percent.

The deal for Pfizer’s SMA, Promil and S-26 Gold baby-milk formulas, the biggest to-date for the Nestle Group, was beat out by Danone (NASDAQOTH: DANOY.PK) and Mead Johnson (NYSE: MJN).  With Pfizer wanting to concentrate more of its business on its pharmaceutical operations, Nestle agreed to pay 19.8 times what analysts estimated for the unit’s expected pretax 2012 earnings; 85% of the nutrition unit’s revenue comes from emerging markets with about a quarter of its sales from China.  This will bring Nestlé’s market share to first place in Asia and up from eighth place in China to second, information according to a New York Times report and other sources. (more…)

Liz Claiborne of Yore Reduced to Rubble on Fifth & Pacific

From the signature suit jacket and “little black dress” of CoCo Chanel, to the first pair of designer jeans of Gloria Vanderbilt, and to the sensibly chic coordinated separates of Liz Claiborne, the business of fashion transformed our daily routine thanks to these iconic women who revolutionized the apparel industry by bringing Main Street fashion to households everywhere; leaving an indelible impression and cementing their names in history for generations to come.

Contrary to this fact, the announcement from Liz Claiborne’s CEO Bill McComb that the company’s soon-to-be name change to Fifth & Pacific Cos., which takes effect in May, suggests a name is just that… a name – nothing more, nothing less; leaving the notion that a name by any other name is not always a rose.  To make matters worse, the $1.3 billion international conglomerate is looking more and more attractive as a takeover target and investors are eagerly anticipating by driving shares up 13%, on March 30, the biggest gain in four weeks after the buyout buzz was released.  Private equity firms such as KKR & Co., Permira, Warburg Pinus LLC, VF Corp., and Warnaco Group have all been reported to show interest in a possible buyout at $20 a share; LIZ currently trades at around $13.00.

LIZ has released statements refuting talks of going private. (more…)

Facebook’s Foiled IPO: Should We Be Surprised?

The aftermath of the Facebook (NASDAQ: FB) IPO blunder left many to wonder whom to blame for the fiasco.  In less than a week’s time the status of the initial public offering of Facebook Inc. was updated to controversial.

What first appeared as a seamless (and highly profitable) opening day of trading turned chaotic when orders for some 30 million shares went unconfirmed until later in the day and some as late as two to three days afterward, according to reports.  The second act to follow in the trail of discontentment was the allegations of insider trading from lead underwriter, Morgan Stanley (NYSE: MS).  Last, and most certainly not unnoticed, was the ending of a lackluster performance of the all-too-anticipated shares of Facebook.  What fired off as an immediately hyped hot stock at $42.00 slowly crawled back down to a turtle’s pace to its original offer price of $38.00. (more…)

Is Twilight Zone Entering the Retail Zone?

Imagine if you will.  You walk into a store (no particulars on the type) and as you approach a rather gnarly, but intriguing-looking device, displayed proudly for all to see just at the cusp of the entrance and the gallery, a red light appears and wink’s at you (but what it’s really doing is scanning you from head to toe).  One more step closer towards the leering Datatron and a slip of paper emerges.  Your curiosity causes you to grab it: what does it say?  Now before you is a list detailing everything that you may have (the store doesn’t want to presume, of course) come to the store for and has carefully mapped out the locations to each item in their perfectly manicured aisles.

Sounds farfetched?  Well, not if today’s retailers have anything to say about it. (more…)

High Sales and Raised Stakes Signal Caution for Retailers

Present-day retailers are contesting with a slow U.S. economic recovery, high unemployment, low discretionary spending, and an even lower credit-rich clientele, but that has not stopped the retail service industry from gaining momentum.

Last week, the U.S. Census Bureau reported month-over-month retail spending, excluding cars, gasoline and building supplies, in February was $407.8 billion, up 1.1% – the highest in five months – from January and 6.5% above last year.

Added to the drive is Kiplinger’s Economic Outlook for 2012.  The personal finance magazine expects retail sales to grow by 6% (which is down from the previous 7.4% prediction made in 2011); a GDP expected growth of 2%-2.3%, up from last year’s 1.7%; and for the inflation rate to continue its steadily decline- down from an October 2011 high of 3.9%- to lower from its current rate of 2.9% to 2%.  But, “…despite the lower pace of growth, in absolute terms retail sales will rise nearly $252 billion this year.  The pace last year was better, but only because 2010 retail sales were still stunted from the recession.”  Martin Crutsinger, of the Associated Press stated that, “For all 2011, sales totaled a record $4.7 trillion, a gain of nearly 8% over 2010. It was the largest percentage increase since 1999.”  Also, “The figures confirm evidence that the economy was strengthening as 2011 ended.” (more…)

Scandals, Bribes and Lies: When Corporate Ethos Run Amuck

Once again the airwaves are inundated with the latest reports on yet another multinational, multibillion-dollar corporate scandal, and this time, the fingers are pointed at Wal-Mart (NYSE: WMT).

The world’s largest retailer is accused of suppressing details from an internal investigation of an overseas subsidiary that citied the bribery of Mexican officials for millions of dollars in 2005.  The New York Times revealed that Walmart executives did not inform the Department of Justice of possibly violating a federal anticorruption law until last year, after the story originally broke – by Time Magazine – in late October.  Once the second news probe occurred in April, Walmart’s shareholders threatened to use their shares to vote against five of the directors who are up for re-election next month; the following trading day, WMT’s shares fell 24% and, consequently, a Californian pension fund has filed a lawsuit seeking damages against Walmart’s board over its alleged cover-up.

And in a move not to be overshadowed by its Western counterparts – perhaps growing weary of nobility- Japanese camera-maker, Olympus, has committed one of the biggest white-collar crimes recorded in Japanese history.  From a culture that cultivates a business model of complete governance and compliance, it was revealed last year (also in October) that for 13 astonishing years Olympus executives falsified financial statements that amounted to a $1.7 billion accounting scheme. (more…)

Apple’s Critics Spoil the Bunch

English: The logo for Apple Computer, now Appl...

English: The logo for Apple Computer, now Apple Inc.. The design of the logo started in 1977 designed by Rob Janoff with the rainbow color theme used until 1999 when Apple stopped using the rainbow color theme and used a few different color themes for the same design. (Photo credit: Wikipedia)

When Apple (NASDAQ: AAPL)
released in January its 1Q and end-of-year 2011 financial results, it
came as no surprise to me (I shall declare) that the tech powerhouse
surpassed analysts’ expectations, soon thereafter solidifying its
position as the world’s largest company in terms of market share.  But
what I did find surprising, however, is the notion that everyone (it
seems) from Wall Street professionals to amateur analysts were beginning
to downplay the tech giant.  Somehow forgetting that it’s not just
corporate culture and financials that affect the market value of some
companies, it’s also social significance that impacts price as well. (more…)

Speed Trading Expands Growth for ICE

If the securities market were a dysfunctional family, high-frequency trading would be its evil genius’ cousin.

Company valuations are giving way to computational probabilities.  The scope of investing in corporate stocks- from possessing research savvy to having investment skills – is being reduced to statistical un-biases, void of basing any decision on human emotion and God-given intuition.  Investment gurus are being replaced by mathematical wizards.

These are the sentiments of those whom oppose the trading mechanism and it is not hard to see why this is so.  Media’s portrayal of the world of high frequency trading — with words like “secretive” and “shadowy”– leaves it to be shrouded in mystery but because of the unknown factors involved it therefore becomes controversial.

Since the phenomenon of high-frequency trading (HFT) began to take off a few years ago only a handful of financial firms were involved in the practice at the time.  Today these same firms account for 70% of all the trading volume done in the US marketplace.  The once iconic imagery of brokers trading on Wall Street is being substituted for super-computer hubs capable of exchanging deals in nanoseconds. (more…)

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