It being Easter, I thought those of you dispirited by the
global economic crisis might like to read something
uplifting, just to show that there is a God after all...
At least he knows how to save the world's poor, though,
eh?
Bono Becomes The Worst Investor In America
Posted: March 24, 2010 at 3:04 am
Bono, the Irish rock star, has put significant money into
Elevation Partners, arguably the worst run institutional
fund of any size in the United States. Bono is listed as
one of the five members of the firm’s investment team. The
fund claims that its “mission is to help media and
entertainment businesses develop and market great
content.” In the process, it has made an unprecedented
string of disastrous investments which even bad luck could
not explain.
The most well-known of the Elevation investments is Palm
(PALM) which made a completely unsuccessful run at the
smartphone business dominated by Apple (AAPL), RIM (RIMM),
and handsets powered by the Google (GOOG) mobile operating
system known as Android. Wall St. had hoped that Palm’s
new line of Pre handsets would allow the company to be a
modest competitor in the industry. It has, instead, burned
through large amounts of money and, ,by its own admission,
is in trouble as it tries to reach what were fairly modest
sales goals. Elevation was recently quoted by Reuters that
it still has faith in Palm, a company in which it bought a
25% stake in 2007. It is astonishing that Elevation would
publicly say it still has faith in a company which is
close to non-existence. The results of Palm’s latest
earnings release drove its shares down to $3.65. The stock
traded at over $18 last September. Elevation has a total
of $460 million in Palm. Whitney Tilson, managing partner
of T2 Partners, a New York-based hedge fund, recently told
MarketWatch, in reference to Palm, “There is a 90% chance
that they go bankrupt or get acquired within a year.”
In 2006, Elevation invested in Forbes Inc., owner of the
famous business magazine. Reports about the deal say that
Forbes was divided into two pieces at the time of the
investment and that the Elevation money went into the
media company’s online operations. The amount of the
investment is around $300 million, according to several
experts. The total value of Forbes Inc. was about $750
million at the time. Business magazines have been badly
damaged by the recession and the movement of readers from
print to the internet. The value of Forbes’ larger
competitor, BusinessWeek, dropped to $5 million that
Bloomberg paid for it last November. BusinessWeek lost $40
million in 2009. Forbes may have done somewhat better than
that, but the value of the family controlled business that
was once run by Malcolm Forbes has dropped by at least
80%. Elevation owns an illiquid investment in a media
company that is now worth perhaps $100 million.
Another of Elevation’s investments is Move.com (MOVE), the
owner of a series of home and real estate websites. The
company’s last proxy statement shows that the investment
firm owns 26.7 million shares or a little less than 15% of
Move. Elevation put $100 million into Move in November
2005. Move.com shares have lost about 50% of their value
since then. Last year, Move had a net loss of $7 million
on revenue of $212 million. The market value of the firm
has dropped to $340 million and the stock trades at just
above $2.
Elevation put $25 million into local business review site,
Yelp, in January. The fund said it would raise its stake
as high as $100 million through the purchase of additional
shares. Yelp reportedly turned down a $500 million buyout
from Google (GOOG). The search company is fortunate that
its offer was rejected. Yelp’s San Francisco operation was
sued last month charging that the services it provides are
fraudulent. Yelp allegedly offered companies which got bad
user reviews the opportunity to have them removed from the
site in exchange for the purchase of advertising. ABC News
recently reported that “since late February, at least
three lawsuits seeking class action status have been filed
against the site by a dozen companies, complaining that
reviews are manipulated depending on which companies
advertise on the site and which ones do not.” It may take
years for the suits to be resolved, but Yelp’s image is
permanently damaged. It is impossible to calculate how
much Yelp’s value has dropped because it is a private
company, but finding a buyer for the company now at any
price is unlikely.
Bono has lost a great deal of money by investing with
Elevation, certainly millions and millions of dollars. The
Irishman would have been better off in CDs of the
financial sort.
--
Dr Jon Cloke
Lecturer
Geography Department
Loughborough University
Loughborough LE11 3TU
E-mail: [log in to unmask]
Tel: 00 44 07984 813681
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