I have decided to allow those who are curious or who may not have not heard of me, and those oft celebrated MUPPETS (see Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Rip Off Clients) to actually see what I keep behind the BoombBustBlog paywall by distributing our premium research for free. Why do such a thing? Well, to be honest, I do it in celebration of the man quoted as saying "Lets start having fun... lets get funky... let's announce everything... let's be WILDLY positive in our forecasts... lets take this thing to the extreme... if we get wacked [sic] on the ride down-who gives a shit... THE TIME TO GET RADICAL IS NOW... WE HAVE NOTHING TO LOSE..." (hint, this is the current Groupon CEO) in addition to the underwriters of said wonderful company. Read on and you'll see why such independent research is desperately - and I do mean desperately - needed. As a matter of fact, there's no valide reason why (after reading this rather meaty article) my servers should not be overloaded by the deluge of ex-muppets looking for some guidance through the fog of muppet master bankers stateside. To wit...
Wall Street bankers did yeoman’s work pushing through Groupon’s IPO. Now, the bills are coming due.
From their work on last week’s IPO of Groupon, the 14 underwriters who handled the $700 million stock sale will split at least $42 million in fees and underwriting discounts, according to a Groupon regulatory filing this week. The fees are about 6% of the total IPO proceeds, a typical slice for an initial public offering.
Groupon’s lead bankers — Morgan Stanley, Goldman Sachs and Credit Suisse — are expected to take in the lion’s share of the underwriting fees, according to data from CapitalIQ.
The banks could take in an additional $6.3 million in fees if they elect to buy 5.25 million Groupon shares from the company. Groupon declined to comment.
Of course, why not buy the shares back at around $10 after selling them to clueless, non-BoomBustBlog subscribing muppets for $30 just 4 months earlier - AND getting paid $42 million for the massive capital gains privilege. Hey, what's the worst that can happen? Your accountant will have to guzzle one less red bull(sh1t) in order to offest the tax liabilty of one rip-off by another. After all, why pay taxes on money that you extract from muppets? Seriously, why?????
CapitalIQ projects that Morgan Stanley, which had played a lead role in many of the biggest U.S. tech IPOs this year, will collect $17.4 million, or roughly 40%, of the Groupon IPO commissions. Goldman is expected to take in about 21% of the total fee pool, or $8.9 million, according to the Capital IQ data.
... Both Goldman and Morgan Stanley have been vying to lead the expected IPO of Facebook.
Luckily for those who do not want to be muppets, or may not ever have been a muppet, I have plenty of subscriber research for Facebook as well (click here to subscribe)...
Through the end of October, Goldman Sachs was the top-ranked IPO underwriter this year, according to a Dealogic ranking of banks by the collective value of the IPOs on which they work. Morgan Stanley was the No. 2 IPO underwriter in the world, according to the Dealogic figures through October. A year ago, Morgan Stanley topped the IPO undewriter list, and Goldman was No. 3.
It's official, the mainstream media has turned on those "doing God's work" and come to the side of BoomBustBlog.
I must admit, I was shocked when I first read this headline and saw the accompanying cover. After all, Bloomberg was the organization that published a story lavishing adulation upon a young Goldman analyst that had a 38% win rate throughout the credit crisis and (faux) recovery. I see those results as mediocre at best, and downright horrible from a realistic perspective. To make matters even worse, I believe I ran circles not only around that analyst, but the entire firm, see Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best? The next thing you know, this heavy nugget of truth is dropped, and all I can say is.... Damn. Let's excerpt some juicy tidbits from Blankfein Flunks Asset Management as Jim Clark Vows No More Goldman Sachs:
And just so you don't think this is a personal vendetta against said muppet master pulling the strings that do God's work (it's probably more like an impersonal vendetta), let's sprinkle a little yellow stream on the Morgan Stanley parade shall we? After all, Morgan Stanley can be expected to pay up to 60% of those (ill-found? Depending on where your values lie...) gains in compensation, namely bonuses - apart from whether said bonuses were ever really deserved in the first place.... Yes, I'll go back there again, see Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!":
Last year I felt compelled to comment on Wall Street private fund fees after getting into a debate with a Morgan Stanley employee about the performance of the CRE funds. He had the nerve to brag about the fact that MS made money despite the fact they lost about 2/3rds of their clients money. I though to myself, "Damn, now that's some bold, hubristic s@$t". So, I decided to attempt to lay it out for everybody in the blog, see "
The example below illustrates the impact of change in the value of real estate investments on the returns of the various stakeholders - lenders, investors (LPs) and fund sponsor (GP), for a real estate fund with an initial investment of $9 billion, 60% leverage and a life of 6 years. The model used to generate this example is freely available for download to prospective Reggie Middleton, LLC clients and BoomBustBlog subscribers by clicking here: Real estate fund illustration. All are invited to run your own scenario analysis using your individual circumstances and metrics....
... Under the base case assumptions, the steep price declines not only wipes out the positive returns from the operating cash flows but also shaves off a portion of invested capital resulting in negative cumulated total returns earned for the real estate fund over the life of six years. However, owing to 60% leverage, the capital losses are magnified for the equity investors leading to massive erosion of equity capital. However, it is noteworthy that the returns vary substantially for LPs (contributing 90% of equity) and GP (contributing 10% of equity). It can be observed that the money collected in the form of management fees and acquisition fees more than compensates for the lost capital of the GP, eventually emerging with a net positive cash flow. On the other hand, steep declines in the value of real estate investments strip the LPs (investors) of their capital. The huge difference between the returns of GP and LPs and the factors behind this disconnect reinforces the conflict of interest between the fund managers and the investors in the fund.
Okay, enough the Muppet Manipulating, Money Marauding, Doing Work in God's Name Brand Bank Bashing... Let's get down to the nitty gritty of the report that I said I will give away for free. I am offering the report, earnings advisory addendum and accompanying simplified model to show what we're made of. Of course paying subscribers, and even casual blog readers, cannot say that I didn't thoroughly warn you! Early shorts on this stock as per our research notes valuation matrices would have given pleasant Christmas presents and would have also stuffed one hell of an Easter basket as well!!!
In case you still don't get it, the sell side research departments of these banks did not offer BoomBustBlog research to their clients. Oh no, then how in the hell can they dump their stock??? They issued glowing reports from their own analytical cum soft sales staff.
On that note, let's reminisce.... In June of 2011 I release proprietary research to BoomBustBlog Subscribers. You can now download said report absolutely free, here Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36). After reading said report, prepare for some real comedy, as reported by Dailypolitical.com:
Groupon (NASDAQ: GRPN) was downgraded by equities research analysts at Stifel Nicolaus from a “hold” rating to a “sell” rating in a research note issued to investors on Monday.
Other equities research analysts have also recently issued reports about the stock. Analysts at Bank of America (NYSE: BAC) downgraded shares of Groupon from a “buy” rating to a “neutral” rating in a research note to investors on Monday. They now have a $20.00 price target on the stock, down previously from $30.00. Separately, analysts at Benchmark Co. cut their price target on shares of Groupon from $32.00 to $28.00 in a research note to investors on Monday. They now have a “buy” rating on the stock. Finally, analysts at Goldman Sachs (NYSE: GS) reiterated a “buy” rating on shares of Groupon in a research note to investors on Thursday, February 9th.
Groupon traded down 3.20% on Monday, hitting $14.54. Groupon has a 52-week low of $14.85 and a 52-week high of $31.14. The company’s market cap is $9.376 billion.
Whoa!!! Goldman Sachs reiterated their "buy" recommendation just in time for their damn Muppet Clients to lose ~40% by the close of the market today. Go ahead, stuff those damn Muppets, fellas!
For the record, in June of 2011, a full ten months ago, I made clear to my subscribers the following (as excerpted from the now free download)...
We value Groupon at $6.6bn using DCF. The current valuation is based on 10 years of revenue projections which are overly optimistic in our view. We have forecasted revenues of $4.0bn in 2011 and expect revenues to nearly double to $7.5bn in 2012 and reach $35bn by 2020. We have assumed cost of equity of 12% and terminal growth of 3% from 2021 onwards. We have kept gross profit at stable levels and assumed operational gearing to (∆ Operating Profit / ∆ Revenue) to improve considerably. Despite these optimistic projections we were still not able to justify a valuation close to $10bn let alone $20-25bn. We only see downside risks to valuation of $6.6bn and believe that Groupon’s rejection of Google offer of $6.0bn was a mistake in first place. Google’s valuation of $6.0bn most assuredly included a premium for synergies that Google could have achieved with Groupon which would be clearly absent in the standalone entity. We see the fair value of Groupon close to $3.0-4.0bn if we assume a more realistic picture. Given all kinds of questions surrounding Groupon’s business regarding the sustainability of revenue growth, costs control and even the business model itself (i.e., the relationship with merchants) and external competition, we remain deeply concerned even on the sustainability of a successful IPO for Groupon.
For the record, at about $14 per share, Groupon is market-valued at about $9.1 billion dollars!!!! Here are some key highlights: Groupon restates revenue, EXACTLY as I warned just three months earlier.
- Monday, 26 September 2011 What's The Best Way To Profit From Groupon's IPO?
- Groupon Revenue Restated 09/26/2011
- Sunday, 13 November 2011 I Hope You Groupon IPO Investors Got Coupons At The IPO!!! Yeah, That's Right I Was The First To Say It
I noticed in the comment columns of some of the blogs that there was some controversy concerning my dressing up as a Zulu warrior in my hunting of the giant Vampire Squid. I wish to correct thee. I did not dress up as anyone but Reggie. I had shorts on from the Gap. As for the weaponry donned, yes I did grab a little something from my personal stash, but it was not Zulu, it was Masai in origin. I suggest all brush up on their African warrior history. Why don weapons at all? Well as intellectually and physically capable as I desire myself to be, hunting Vampire Squid can be a dangerous occupation, therefore one should go into the fray fully packed. Was I somehow regretfrul of marketing my brand as who I actually am? Of course not. If anything, I suggest many of you institutional asset manager types don intellectual weaponry of some sort or fashion, be it of Zulu, Masai or other origin. After all...
Who would rather be, a 45% to 62% capital LOSS MUPPET or a Masai (or Zulu) Warrior? Should I even have to ask?
|Shaka kaSenzangakhona (aka Shaka Zulu)|
|The only known drawing of Shaka—standing with the long throwing assegai and the heavy shield in 1824, four years before his death|
|Reign||1816 - 1828|
KwaZulu-Natal, near Melmoth
|Occupation||Monarch of the Zulu Kingdom|
Maasai warriors in German East Africa, c. 1906-1918.
For some reason, it appears that there are still many monied interests that would literally want to be a little green (yet cute) victim versus an entity that would stand up, arm itself intellectually and defend its own economic interests. Alas, to each their own....
Goldman Clients aka MUPPETS!!!
Click any and all graphics in this post to expand to print quality
Summary: This is the first in a series of articles to be released this weekend concerning Goldman Sachs, the Squid! In this introduction (for those who do not regularly follow me) I demonstrate how the market, the sell side, and most investors are missing one of the biggest bastions of risk in the US investment banking industry. I will also...
|Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?||
Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?
Welcome to part two of my series on Hunting the Squid, the overvaluation and under-appreciation of the risks that is Goldman Sachs. Since this highly analytical, but poignant diatribe covers a lot of material, it's imperative that those who have not done so review part 1 of this series, I'm Hunting Big Game Today:The Squid On The Spear Tip, Part...
|Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!|
|Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!||
Yes, this more of the hardest hitting investment banking research available focusing on Goldman Sachs (the Squid), but before you go on, be sure you have read parts 1.2. and 3: I'm Hunting Big Game Today:The Squid On A Spear Tip, Part 1 & Introduction Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To...
- Hunting the Squid, Part 5: Sometimes Your Local Superhero Doesn't Look Like What They Show You In The Movies
- What Was That I Heard About Squids Raising Capital Because They Can't Trade?
- Reggie Middleton vs the Squid That Can't Trade!
And back to Groupon for a minute... Way to Go Muppet Masters Goldman et Morgan, eh? Let's not fret too much about the $42 million in fees. My assumption is that it is both expensive and fraught with red tape, you know getting a Ponzi scheme authorized by the SEC!!!
A quick visual op-ed courtesy of williambanzai7...Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!Reggie Middleton Serves Up Fried Calamari From Raw Squid: Goldman Sachs and Market Perception of Real Risks!