Wednesday, May 13, 2009

Goldman Sachs – Next Wave IPO Forum

- IPO – Heart of Goldman Sachs
o Commitment to tech
o L-T market leadership in technology financing
o Success w/ IPO franchise
o #1 M&A advisor
- Rally in context
o Restored Confidence
o Fear of missing rally
o Moderation of Volatility
- Bull vs. Bear Case
o Bull
 Government intervention working
 Economic data points are positive
 Corporate profit declines slowing
 Fear of missing rally
 Market is cheap
o Bear
 Macroeconomic data remains bleak
 Recovery slow – muted
 Corporate profits decline continues
 Intervention risk remains
 Massive inflection
 Rally lacks conviction
- What makes a good IPO?
o Formula – Characteristics
 Management
 Earnings
 Sector
 Cash-Flows
 Growth
 IPO Discount
 Track Record
 Conservative Financial Projections
o Components
 Sector
 Stage of Growth
 Earnings Drivers
 Management Track Record
 Proper sized/structured transactions
o Early companies that IPO
 “Need to be bigger”
 Scale and Profitability

 “Catalyst – Economic Stabilization - Market Easier to Access”
- Other Thoughts:
o Growth – out perform Value during rally
 Technology is a big benefactor
 Technology is up 35%
 Investors moving into later-stage cyclical
 IT Survey more positive – “Recession fatigue”
- Closing Thoughts
o IPO Market Open
o Investors Looking for new growth stories
o Supply/Demand favors issuers
- Panel – “The IPO – Lessons Learned from Senior Executives”
o Advice
 Predictability
• Very good forecast – no positive or negative surprises
 Maturity
• Space Shuttle – when you go for the IPO – don’t drop the booster rockets and fall back to earth!
 No Doubt
• Go when you go – don’t get on file and wait for the right time
o How to best achieve
 Maturity and Predictability
• Business model, expense
• CEO, CFO, Sales – good at hitting numbers
 Not to do
• Wait too long to hire good public CFO and finance team
• Stop while started
• Blame the auditors
 Cost of Compliance
• 404, SARBOX, Malpractice, Registration fees - $1-2m+
 Board – need a great board
• Need operators – not just VCs
• Difficult to change board members
 Choosing Underwriting Team
• Pick one horse
• Other firms may give you more research following
 Road-show Process
• Grueling process - Childbirth
• Don’t know until the end
• 90 meetings in 2 weeks
• International is not that important
 Public Market Pressure – Significant
• Little room for anything
• Don’t spend too much time with investors – cap at 5% of CEO time
• Hit your numbers
- Buy-side Comments
 Charles Ellwein – Capital Research Global Investors
• Focus on public - $9b Small cap fund - $660B AUM
• When looking at a company
o CEO – is this someone I can trust, consistency
o Red Flag if they don’t know their business well enough
 Ajay Diwan – Seligman Investments
• Cross-over investments (public and private)

Friday, May 8, 2009

Papa's Recent Picks

Papa – list of 20 names for long-term investment - still keeping in cash till next pullback - then:
- Midsize Growth
- Copper
- Homebuilder
- Gilead Science
- Cal Water Service
- Stayer Education
- Commodity – Lumber
- Akamai – infratech
- Comcast

Monday, May 4, 2009

Quarter-Life Crisis

This is something I have thought a ton about recently – some I have felt – and even more what I have seen or heard from friends trying to figure their own path out.
It is interesting to see how because of the close to infinite options we now get to consider at any moment – as compared to in the past where our parents or their parents were restricted to much more limited universes – you see people overwhelmed to the point of paralysis.

Social networks aren’t all evil – they connect us with other who we might normally not be – and reinforce the bonds of already established friends. The problem is that you end up connecting with too many people and that the ties to any individual relationships become weaker. There will be a backlash to the social network lifestyle that has emerged – and I think it will only get worse to those growing up with it from a young age.

The real problem this generation falls into with many girls and guys at this age is an unwillingness to figure out who they are and too much cynicism based on tremendous insecurities. Not willing to have real conversations, not willing to go against what is ‘cool’, and willing to let others treat them in ways that they are not proud of.

I got a great quote sent to me today – “Your Only Fear is Possibility.” Our generation is a great example of that in action (inaction…). There will always be opportunity costs – but making decisions and going for it is what it comes down to. My Grandfather said that he felt that both people he has met of my generation as well as privileged young adults don’t have that fire to make them want to succeed quite like his generation. You have to find it yourself.

“Being paralyzed by infinite possibilities. Even though I know what I'm doing now isn't what I ultimately want to do with my life, I find it hard to take the next step b/c it might not be the 'right' step. When you have everything at your fingertips, it’s terrifying to think you might choose the wrong option. I think what this article, and conversations with people like you remind me of is that any action is superior to inaction and it's ok to fail as long as you challenge yourself to keep learning and keep being excited about what is next.

I do think that the general discussion of what it means to be in your 20s overall is also worth studying. As you said, the timing of life stages are so different for our generation -- most people our age (myself the exception, clearly haha) won't even consider the idea of marriage b/c they search for independence, while at the same time relying on their parents for many things. I sometimes wonder if it's this inherent contradiction b/w quest for independence and realistic dependence that contributes to ongoing strife and lack of identity in the 20s.”(from a close friend)

(With regards to relationships), I’ve found myself close to the right place at the wrong time, the wrong place at the right time, and the wrong place at the wrong time. But so far – have not found myself at the right place at the right time yet. Marriage and kids is something I am very excited about. But just like you – I take it very seriously (unlike I think much of our generation will). I think the divorce rate will increase to 70% by the time we are older.

As far as jobs – I realized that I love starting things. I like having my opinions and ideas valued. A start up is the best place for that. If it is a financial exchange today – in 10 years it could be a water purification biotechnology process. I love learning and interacting with people – and this gives me the chance to do it. My Myers Briggs results were mixed INTP/INTJ which is a combination of an architect/mastermind personality. This works for me.

You will find the role you want – and you will be very successful throughout your life. One thing you have to remember – enjoy this whole process along the way.
When we went to NCAAs for UCLA in 2004 – our coach sat us down and told us to remember what it is like to practice the week before, remember the pre-final dinner banquet – take it all in. You can have your ring from the national championship – but what is really valuable is the experience and memories associated with it.

Most people’s first jobs could sometimes be considered a very negative experience if looked at them that way – but I don’t. I learned a ton from both my experiences from skill-sets to have and how not to do business.

Whatever you do – it will build you and your ability to do more down the road.