Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EDT, Wednesday, October 21, 2009: Indian
summer in New York. Nice for tennis. Not so nice for the markets, maybe.
long does it take to grow your new technology company? IPO
Dashboards is a neat web site. It begins:
Have you ever
seen a business plan with hockey stick revenue projections? Its common
for VCs to receive business plans showing sales growing from 0 to $100m in
the first 5 years of a companys life.
In fact, growth
conversations between VCs and management teams often cause angst. One of the
reasons is that people from both groups tend to have unsubstantiated beliefs
about how long it takes to build an important company.
conversations would be easier if we simply knew how long it takes to build
a successful company?
You pick the technology
sector and it plots a chart showing how long it took the company to get to $50
million in annual revenues. Here's a chart I did on operating systems:
to get rid of credit cards: New fees:
If you pay your bills in time, you could be hit by a new fee from the Bank of
America -- $29 to $49.
If you don't charge enough, Citibank wants to charge you extra.
chart is from USAToday:
offer cheaper, better credit cards. For more, go to USAToday.
phones can be dangerous: Use one while driving, you'll crash. Use
one in a thunderstorm, you may get hit with lightning. Use one with a third
party made battery and it may explode. Use one too much and you'll need to get
in the skies: The airline quoted $18,000 on a first class trip. It
came down to $13,500 after the airline was asked for a "price match."
Them's new words in war against gouging.
eats too much. Latest restaurant tip: Eat an
appetizer, or two. Skip the main course. Advantages: fewer calories, better
food, lower bill.
lovers ganged up on Harry. They didn't like my comments yesterday
about the uselessness (and long-term inevitability) of Windows 7. My advice
remains: Stay away from Windows 7. I follow an old adage: If it works, don't
mess with it. Right now, Windows XP is works fine for me.
if you're obsessed with Windows 7 hype, ComputerWorld has a piece today, FAQ:
How to prep for an XP-to-Windows 7 upgrade.
to find bargains for the ultra-rich.
American buyers shopping in cosmopolitan European cities may lose its appeal.
Why purchase a $670 pair of Gucci loafers in Berlin, when they cost a full
15% less at home in New York? However a Rolls-Royce Phantom at $377,500 is
cheapest in Hong Kong.
more useless information on living "well," click Forbes.
insider trading works. Raj Rajaratnam got greedy.
He seemed to be doing well. Then he got obsessed by the idea that insider trading
would make him even richer (and even fatter?).
Maybe he also figured when he became rich, he could afford to buy a decent
So how did all
the insider information work? Apparently not too well. Here's an excerpt from
today's New York Times business section:
Case, a Deal That Lost Millions by ALEX BERENSON
Raj Rajaratnam, the authorities say, masterminded one of the biggest insider-trading
schemes in a generation.
But if Mr. Rajaratnam
was trading on insider information, apparently he was not very good at it.
A close examination
of the trades that led to his arrest last week reveals a startling fact: In
all, Mr. Rajaratnam lost millions from what prosecutors characterize
as illegal trading.
One bad trade,
in the shares of the chip maker Advanced Micro Devices, cost his hedge fund,
the Galleon Group, $30 million. That loss more than wiped out the profits
that prosecutors claim Mr. Rajaratnam and his accomplices reaped with their
highlighted the winning trades in a case that they say stretched from the
secretive world of hedge funds to some of the countrys biggest technology
companies. They did not mention the losers.
not, insider trading is insider trading. And Mr. Rajaratnam, who maintains
he is innocent, might have broken the law even if he lost money on his
trades. (The ultimate irony?)
But the fact
that some of the investments soured, and that, in all, Mr. Rajaratnam lost
money, could be powerful evidence for defendants. Inside information is, by
definition, information that is material to investors, and thus could cause
a companys stock to move in a direction that will be obvious in advance.
if a companys stock is trading at $75 and someone learns that the company
will be taken over for $100 a share, that information would be material. But
routine corporate news a retailer announcing new store openings, for
instance is generally not considered material.
is trading on material nonpublic information, said Robert A. Mintz,
a former federal prosecutor who now heads the white-collar defense practice
at the law firm McCarter & English. Theres no requirement
that that trade results in a gain to the defendant. But if it turns out to
have been a money-loser, it obviously gives the defense some fodder to argue
that the information was not material.
a professor at the Indiana University Kelley School of Business and the co-author
of a study on insider trading convictions from 1995 to 2004, said that convicted
defendants had profited in every one of the cases he examined.
is likely to weaken the prosecutions case, Mr. Bhattacharya said.
A one-page graphic
released by prosecutors mentions six trades made by Mr. Rajaratnam that netted
Galleon, his hedge fund, total profits of $20.6 million.
that handout is a 2008 trade that moved badly against Mr. Rajaratnam and Danielle
Chiesi, who also is charged in the fraud case. Ms. Chiesi worked at New Castle
Funds, another hedge fund, and is accused of supplying insider information
to both Mr. Rajaratnam and New Castle.
2008 to October 2008, Mr. Rajaratnam ordered Galleon to buy at least 16 million
shares of A.M.D., a computer chip maker, according to the federal criminal
complaint against him and a related complaint by the Securities and Exchange
During the same
period, New Castle bought about 2.5 million A.M.D. shares, according to another
criminal complaint that focuses on Ms. Chiesi.
New Castle bought the shares because Mr. Rajaratnam and Ms. Chiesi received
information from an I.B.M. executive in August that the government of Abu
Dhabi would invest billions of dollars in A.M.D. as part of a deal for A.M.D.
to spin off its manufacturing facilities, according to the complaints.
But the possibility
of a deal between A.M.D. and Abu Dhabi had been rumored before Galleon and
New Castle began buying.
speculate that the spinoff will require a substantial investment from the
government of Abu Dhabi, The Austin American-Statesman reported on July
$85 million to $90 million on the 16 million share purchases that are disclosed
in the two complaints, an average of about $5.50 a share. But as global stock
markets plunged in September and October, A.M.D. shares sank too. By Oct.
6, Galleons shares in A.M.D. were worth only about $68 million, a loss
of roughly 25 percent. On Oct. 7, A.M.D. announced its deal with Abu Dhabi.
Its stock closed about 8 percent higher that day, but was still significantly
lower than Galleons purchase price.
held on to nearly all its A.M.D. stock after the deal was announced, and A.M.D.
stock resumed its plunge during the rest of October. ...
I always thought
if you were trading on an event and the event happened, you got out. After all,
you'd been waiting for the "event." It had now happened. So why hang
around? What am I missing?
for a colonoscopy. Yes, Harry is nagging again. Make sure you remember
to say some of the alleged comments made by patients (predominately male) while
a doctor was performing their colonoscopies:
+ 'Take it easy,
Doc. You're boldly going where no man has gone before!'
+ 'Find Amelia
+ 'You know,
in Arkansas , we're now legally married.'
+ 'Any sign
of the trapped miners, Chief?'
+ 'Hey! Now
I know how a Muppet feels!'
+ 'Hey Doc,
let me know if you find my dignity.'
+ 'You used
to be an executive at Enron, didn't you?'
+ 'Could you
write a note for my wife saying that my head is not up there?'
This column is about my personal search
for the perfect investment. I don't give investment advice. For that you have
to be registered with regulatory authorities, which I am not. I am a reporter
and an investor. I make my daily column -- Monday through Friday -- freely available
for three reasons: Writing is good for sorting things out in my brain. Second,
the column is research for a book I'm writing called "In Search of the
Perfect Investment." Third, I encourage my readers to send me their
ideas, concerns and experiences. That way we can all learn together. My email
address is .
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