SubscribeThe VISA IPO Paradox: IPO or Bailout?
March 19, 2008
The VISA (V) IPO is coming and it is going to be BIG. A few days ago, I speculated here that the IPO may be pushed back as the markets were in no mood for an IPO even as few have been brought to market of late. It was, and is, not the most opportune time as investor’s are frazzled and institutions are disquiet during what is shaping up to be a historic and cataclysmic economic event born out of our general debauched view of leverage. (Barry Ritholtz: thanks for the Thesaurus idea- I hope I didn’t embarrass myself!)
So, what does that mean for Visa? If you look at the proceed distribution, according to Dealbook, it is rather interesting to note that $1.25 billion goes to:
Even so, the offering will generate a windfall for Visa’s thousands of member banks, which own the company. JPMorgan Chase is expected to reap about $1.25 billion, while Bank of America, National City, Citigroup, U.S. Bancorp and Wells Fargo are likely to receive several hundred million dollars each.
Wall Street firms, in the meantime, stand to collect upward of $500 million in underwriting fees from the sale.
At the same time over 75% of the recent IPOs that had been scheduled have been postponed or cancelled as the market is not capable of capitalizing new issues when it it is so close to margin calls. VISA’s get-it-to-market-and-fast attitude for their IPO is a flagrant and obvious bailout for a few of the institutional beneficiaries. Time is the ultimate enemy in this mêlée against insolvency. The money is needed and it is needed NOW!
So, the VISA IPO is a GO!; no matter how much better it would have priced if times were different. I think that with the potential for insolvency increasing, postponing could be a prove disastrous for one or two of the member banks desperately needing a fast infusion of cash to continue business as “usual.”
(V) (BAC) (NCC) (JPM) (C) (USB) (WFC)
Disclosure: Clients of Horowitz & Company clients hold positions of BAC as of the date of publish.
TDI Episode 48: LIARs, VISAs and BEARs - OH MY!
March 17, 2008
Guests: Zach Scheidt, Harry Dent and David Gaffen. Markets and the future with all that occurred this week is our initial topic. David Gaffen of the Wall Street Journal along with Harry Dent, famed author and economist, provide some clues as to where the
markets and the economy is heading.
Zach discusses VISA IPO and the state of the market provides some great tips on profiting from IPOs. Are we going to crash or have we reached bottom? We introduce, The ZachZone in this episode, a segment to become a regular part of The Disciplined Investor Podcast. This is an episode that will help you profit.
One hedge fund Zach manages strictly invests in IPOs as well as new equity issues. Zach brings great insight along with a refreshing and honest view of what is billed to be the BIGGEST IPO in history. VISA is being touted as a top play by the investment bankers, even in this horrible market. Yet, we look a bit deeper to see if this is
actually something that will be of benefit. (visit ZachStocks)
Zach is the founder and Managing General Partner of Stearman Capital, LP. After graduating with honors from Lee University, he attended Georgia State University at night while beginning his career in the securities industry. He received his MBA in 2001 and also achieved the Chartered Financial Analyst designation in 2003.
Zach is also an avid writer and periodically publishes articles on individual securities as well as sector and general market themes. He is a regular contributor to Seeking Alpha and has been quoted in numerous financial publications including the Wall Street Journal, TheStreet.com and Yahoo! Finance. A participating member of the Atlanta Society of Financial Analysts, Zach maintains an active profile in the Atlanta investment community.
IPO Sites Mentioned: IPOCentral, Yahoo! IPO, StreetInsider, MorningNotes* (*premium)
Stocks Mentioned in this and recent episodes: (V) (BSC) (LEH) (SPY) (SAFM) (GS) (MER) (QID) (SKF) (QQQQ) (IBKR)
on Thursday, March 20th. CLICK HERE….
Guests scheduled for upcoming Episodes: Bill Cara, Mike Huckman, Robert Reich
IBKR plus FEAR = Buying Opportunity
March 17, 2008
Interactive Brokers (IBKR) is part of the investment brokerage sector which was trashed and left for dead today after the MF Global (MF) news broke. Monday, the news was not pretty and has taken our some of the quality with the crap. But some of the reason’s behind this stock’s
movement is unclear. With MF Global (MF) was in a virtual free fall and that prompted concern over the entire group, investors are obviously taking their hands off their keyboards and throwing them into the air. Simply, the support (or stomach) HAS LEFT THE BUILDING.
Since FEAR is also an acronym for FALSE EVENTS APPEARING REAL, the real and rumored information surrounding Bear Stearns (BSC) and MF Global today is spreading concern toward any company with market-making operations. The perception is that if there is a cold spreading, the entire sector will catch the flu. This is good news for patient, long term investors.
IBKR does have a market making operation which helps to bring in revenue. Annually, revenue is primarily comprised of 1) trading gains 2) commissions/execution fees 3) interest income. In other words, they are a broker and market-maker. The fear within this sector is that these types of companies have been caught with a huge pile of something toxic that will implode which will then force them to take a huge loss. Yet, in our discussions today with analysts, it does not seem to be Read more
Dendreon’s News - Good Spin, No Spunk
March 12, 2008
Dendreon (DNDN) is one again in the news. At first, it appears that there is a faster track that the FDA is allowing when it comes to the trials for Provenge. If you read the news item it is really nothing significant, yet it is may be a hint that the FDA is softening and may allow for study results to be moved up a year.
None of the informations appears to change any of the results we have seen thus far. It simply allows for the removal of the results within the test-group that show a false-positive return. In other words - the results that are meaningless are being removed from the test group. This should be a common practice, so any excitement created by inferring more from the news should be contained.
Shares are up in pre-market today on this announcement by 15% or so.
This particular topic will be in focus during our upcoming podcast conversation with Mike Huchman, CNBC’s health correspondent.
StreetInsider.com - Dendreon (DNDN) Said FDA Amends SPA on IMPACT clinical trial of PROVENGE
March 12, 2008 7:42 AM EDT Dendreon Corporation (Nasdaq: DNDN) said the FDA has agreed to an amended Special Protocol Assessment for the Phase 3 IMPACT clinical trial of PROVENGE. In addition, the FDA has reconfirmed that they would accept a positive interim or final analysis from the IMPACT trial to amend the Biologics License Application for licensure of PROVENGE. The amended SPA accelerates the expected timing of the final IMPACT results by approximately one year while maintaining comparable powering of the study’s interim and final results. By increasing the number of events and decreasing the alpha (false positive error) spending function for the interim analysis, the Company is able to reduce the number of events for the final analysis (from 360 to 304) and still maintain a comparable statistical power for both the interim and final analyses. Interim results are still expected in the second half of 2008; however, final results are now expected in the second half of 2009 rather than 2010.
In another spin, there are news reports that read: “U.S. health regulators approved its amended trial design of the late stage study of its Provenge cancer vaccine, accelerating the expected timing of the final study results by about one year.”
The fact that the first few words read : U.S. health regulators approved is a magnificent spin, so don’t get caught in this trap. We need to see a real result and change to the FDA position, which is not contained in this news item. While it may show some level of advancement, it may be a good idea to watch for further results.
Disclosure: Horowitz & Company clients are LONG DNDN as of publish date..
Sanderson Farms: Set up to Move
March 11, 2008
There is a good deal of quacking about looking and walking like ducks these days. So why not cluck instead, if only for some relief.
During the past several week, I have been looking closely at opportunities within this decrepit excuse for a stock market. That has lead towards a simple thesis: There is clearly a shift in mentality towards commodities and pressure is building towards another bubbling. That lead to the next obvious question: How to profit?
One particular food commodity has seen a significant move recently: CORN. The same corn that is used for production of ethanol and the same corn that is used to feed chickens. There is a clear inverse relationship that has emerged between corn pricing and the share prices of some of the poultry producers. Sanderson Farms (SAFM) is the one from this sector that seems to have an opportunity to move higher, once the realization that corn prices have a built-in ceiling. That ceiling is created by the need for corn prices to stay within reasonable limits in order to appease the ethanol producers and to maintain reasonable poultry prices.
Sure, I know what you are thinking….Our government and the oil giants (one and the same actually) could give a damn and don’t care if ethanol is priced out of the market. But, in truth, they want to keep the appearance of an alternative fuel for the future, just as much as many of us wish to have an alternative. Beyond the basic premise that corn prices affect the Read more
Links
-
GoToMeeting
