Not too long ago, A123 Systems looked poised to become one of the costliest VC-backed busts of the new millennium. The Watertown, Mass.-based company had raised over $200 million to make lithium-ion batteries for electric vehicles, but couldn't find takers. In fact, A123's only contract at this time last year was with Black & Decker, which used the startup's batteries in some of its cordless power tools. Overall, the company was operating at a loss. A123's most painful loss was General Motors, which had been looking for batteries for its upcoming Chevy Volt. Not only did GM pick a Detroit-based subsidiary of South Korea's LG Chem, but President Obama poured salt on the wound by publicly lamenting that America wasn't making batteries for the next generation of hybrids. As one Boston-area VC put it to me last December: "I'm not sure they have many bullets left, except for the one they'll need to use on themselves." Since then, A123 has experienced the ultimate V-shaped recovery. First came news in April that Chrysler had picked A123 to supply batteries for its first-ever line of electric vehicles (due in showrooms next year). That deal included a plan to open a manufacturing facility in Michigan, and was soon
2 min read · 05 August 2009
Online genealogy company Ancestry.com yesterday filed for a $75 million IPO, and some people instinctively began buzzing about the prospects for yet another VC-backed IPO (following hits like OpenTable and LogMeIn). Only problem is that Ancestry.com isn't really VC-backed. At least not anymore. The Provo-Utah-based company was founded in 1998, and that October raised $10 million in Series A funding from CMGI @Ventures, Epic Ventures and Intel Capital. Less than one year later, it would raise $38 million in Series B funding at a $163 million post-money valuation. The existing shareholders were joined by newbies like Amerindo Investment Advisors, Compaq Computer Corp., L Capital Management, Pivotal Asset Management and Tango Partners. It was all perfectly bubblicious. Beginning in 2003 and 2004, however, some of those investors began quietly selling shares in Ancestry.com to Spectrum Equity Investors, one of the very few private equity shops to dabble
2 min read · 04 August 2009
Last month, The Treasury Department named nine managers for the PPIP, which is designed to help banks escape the toxic messes of their own making. It also said "over 100 unique applications... were received." It almost sounded like PPIP was so popular that Treasury had to beat off hopeful participants with a stick. To know for sure, though, we though it would be helpful to have a list of the rejected applicants. After all, what if my grandmother was one of them? I love her (and she is "unique"), but she's not quite as qualified for PPIP as, say, The Carlyle Group would be. Unfortunately, a Treasury Department spokesman declined to provide the list when I originally asked, so Thomson Reuters filed a Freedom of Information Act (FOIA) request on July 10. We asked only for the names of the applicants, not for any associated financials. We have since received a reply dated July 28 from Stephen A. Moffett, administrative officer for the Office of Financial Stability. It reads, in part:
2 min read · 04 August 2009
Spent some time earlier today on Reuters Insider, from my usual perch. Topic was tomorrow's expeced pricing of the Avago Technologies IPO, what it could mean for KKR, etc. (plus, a rehash of the below post about Fidelity):
1 min read · 04 August 2009
Avago Technologies is set to price its IPO tomorrow night, in what will be the first test of KKR’s recent agreement with Fidelity Investments. For the uninitiated, here is how KKR described the program last month: Through the new relationship, Fidelity will have exclusive access to retail securities that are allocated to KKR in all U.S. public offerings in which KKR participates as an underwriter, including IPOs and follow-on offerings. Those retail securities will be made available to Fidelity's retail brokerage customers as well as to accounts managed by Fidelity's registered investment advisor (RIA), correspondent broker-dealer and other institutional clients. KKR will act as the underwriter of all retail securities that are distributed by Fidelity under the arrangement. I happen to be a Fidelity retail brokerage customer, so decided to ring up customer service in order to divine some more info about the offering. What I learned, however, was that this agreement is only for certain Fidelity brokerage customers. Specifically, you need to have
2 min read · 04 August 2009
1 min read · 03 August 2009
The SEC today released a series of proposed rules that would effectively bar private equity firms from using placement agents, when soliciting capital commitments from government-sponsored organizations (public pensions, etc.). The rules also would prohibit investment advisors from soliciting such commitments within two years of making a political contribution to a system official, and also would require that that investment advisors keep records of all political contributions made by its employees (contributions under $250 would be excluded, so long as the contributor is legally entitled to vote for the recipient). All of this is intended to combat pay-to-play scandals, which have been uncovered in states like New York, Illinois, New Mexico, Ohio and Connecticut. And I completely agree with the ban on political contributions (which extends to other "gifts"). Unfortunately, the umbrella placement agent ban is a broad overreach that will severely hamper new and small investment firms from raising fund capital. Hopefully, a compromise will be reached, whereby the implicit payoffs are banned but the legitimate placement agent work can be maintained. Two other minor thoughts while reading through the 114-page proposal (entire doc posted below): (1) There is no mention of contributions by the spouse of an investment advisor, even though such contributions are commonplace. (2) There is no mention of whether
2 min read · 03 August 2009
The Financial Times reported on Saturday that KKR is prepping at least five of its portfolio companies for initial public offerings. They are: Dollar General, First Data, HCA, TDC and Toys ‘R Us (Erin suggested a few of these last week). This is in addition to Avago Technologies, which has already filed and is expected to price later this month. I read some cynical responses to the news, suggesting that the debt on a typical mega-buyout portfolio company would make such offerings unappetizing to public market investors. Moreover, there is a more general argument about how most company revenues are at or near cyclical lows, and that PE owners should wait until the internal financials improve (Dollar General, of course, being a countercyclical example). I get the arguments, but most PE firms don’t get close to complete liquidation in an IPO. On the Avago offering, for example, KKR and Silver Lake would only have their combined ownership percentage shrink
2 min read · 03 August 2009
The U.S. House of Reps on Friday passed a bill designed to limit executive compensation at large financial institutions, but private equity and venture capital pocketbooks are unlikely to be affected. Draft legislation would have applied to PE/VC firms (plus hedge), but the final bill included a clause about how affected firms -- including “investment advisors” -- must have assets of at least $1 billion. Now plenty of firms publicize their billions, but almost all of that cash in tied up in funds. Investment advisors, on the other hand, typically have between a few hundred thousand dollars and a few million dollars. As Daniel Evans, a partner with Ropes & Gray, explains it: “The funds are investment companies (like mutual funds, but unlike mutual funds they are exempt from registration), and neither mutual
1 min read · 03 August 2009
Departures leave the firm with 45 senior investment and operational pros
1 min read · 03 August 2009
