Author: Jeff

spotify unicorn slayer executive liquidity IPO

This is no Aprils Fools…

This is another case of unicorn slaying.  Lets see how this slay unfolds. Recently Spotify issued a $1B convertible debt from TPG, Dragoneer, and Goldman Sachs clients. We will call them the VC mob (VCM).

Terms:

  1. VCM can convert the debt to equity at a 20% discount of the IPO price.  (print money baby!!)
  2. If no IPO within 1 year, the carnage, oops, I mean the discount increases 2.5% and the interest on the debt (5%) will increases 1% maxed out to 10% every six months there after.
  3. VCM can sell their shares 90 days after IPO.  Spotify employees are locked up for 180 days zombiefied.

What this means is Spotify will IPO ASAP.  The race to zero first reported by The Wall Street Journal.  Treveri Capital specializes in risk management for executive liquidity of pre-IPO companies.

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If the public markets are any sign of the future, unicorn valuations will be difficult to understand.  Public companies are an indicator of comparable private companies.  Public companies are also the most comparable to any private business when seeking valuations because they are constantly being priced during the day with various buyers and sellers.  Although private companies are protected from the volatility of the daily public  markets, private companies have very uncertain valuation numbers especially when they are juiced up.

Even though public companies are public, their valuations are uncertain.  An example is seen here with Linkedin ($LNKD) and Tableau Software ($DATA).  Over night their valuations were annihilated.  LinkedIn has $9.6 billion (-43.63%) and Tableau Software has $2.1 billion (-49.44%) valuation disappear in 24 hours.

LNKD Unicorn

DATA unicorn valuation

As we can see, Wall Street does not hold back.  Eventually these private companies need liquidity for insiders, investors, or expansion.  They either raise another round of fantasy juice, get bought out, or do an initial public offering (IPO).  During this process, valuation is re-analyzed.  If the public markets are any indicator of the future, be mindful of any private company hiccups.

Is this the start of “The Disappearing Unicorn Act?

 

 

Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

David Bowie Bonds Treveri Capital Intellectual Property Debt Finance

David Bowie, known for his eccentric style of music, fashion, and theatrical performances has passed away January 10, 2016.  He was very influential to several generations from the 70’s to the 80’s and more.  What most people forget is his contribution to the financial industry.  He was a financial innovator with his famous “Bowie Bonds”.

With the help of investment banker David Pullman, David Bowie set the path for securitization of intellectual property (IP) with a $55 million bond in 1997.  Securing this esoteric IP can be seen today in the music, film, and digital publishing or formally known as asset backed securities (ABS).  Also, this led to the financing of Motown, James, Brown, Marvin Gaye, Iron Maiden, Rod Stewart, and more.  Today this billion dollar market is flourishing with liquidity on various electronic communication networks (ECN’s).

Thank You David Bowie for being an innovator!!

David Bowie Ziggy Stardust Finance Innovation Bonds Debt IP

 

Unicorn Hunting Permit TreveriCapital Slayer Hunter Alpha Kill

Most people have heard of the term called “Pegasus” or “Unicorn” in the startup world to describe a mythical startup valuation of $10B+ or $1B+.  There is another mythical creature called the “Centaur” with valuations of $100M+ and the “Pony” with valuations of $10M+.  Although the Pegasus and Unicorn are getting all the recognition, Centaur’s and Pony’s may have all the glory for 2016.

There is a new startup landscape on the horizon.  To be a true Unicorn, the companies will be raising capital from investors that will want justification for these current or future valuations.  This means typical Wall St. models will be used for earnings, sales, or growth metrics to show investors the justification of the valuation.  Particular analysis of the most recent 4 quarters and next quarter will be looked at closely.  Instead of throwing money at marketing for user acquisition, costs will be analyzed under a microscope.  Unicorn slaying will be common for these Unicorns that are unable to sustain rapid growth of sales, earnings, or metrics.  Any blips in these quarters can grind the Unicorn into a Unicorn burger.

The risk of high valuation for a Unicorn gets a little ugly when there is limited liquidity.  The SEC is also looking into startup valuation procedures.  As Mark Cuban noted “The only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity.”  Let’s face it, private equity is a different animal than public companies listed on an exchange.  Changing valuations is a risk that all participants will have to deal with.  Because Unicorns are more mature start-up companies, liquidity for owners of the company drops when valuations stay the same or drop.  This is very important because the next round of financing needs a higher valuation in order to make current and potential new investors smile.  These valuations are derived from the prospect of earnings, sales, or growth metrics.

Because of the new strict criteria, investors will be looking at Unicorns or alternatives that have a solid business model, outstanding growth potential, and experienced leadership.  Some of these alternative businesses may be Centaurs and Pony’s for investors to pursue and catch.

2016 will be quite interesting because we will see a rise of institutional investors going into early stage companies in search of Pony’s or Centaurs in hopes of finding a Unicorn.  Some of these Unicorns will transform into the most sought after creatures, the Pegasus.

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

Martin Shkreli Retrophin Ponzi Price Gouging TreveriCapital Security Fraud

Wannabe pharmaceutical hedge fund manager Martin Shkreli gets charged with several violations from the SEC.  Martin gets charged with violations of the 1933, 1934, 1940, and Exchange Act.  Hedge fund manager made several mistakes and tried to hide them.

Some of the violations include:

  • Misappropriation of moneys for food, clothing, medical, office rent, and cash
  • Misleading investors about the size and performance of the fund
  • Falsifying bank and brokerage account assets
  • Lying to an executing broker about his ability to settle a sizable short position
  • Misappropriating $900K for short sale settlement
  • Fraudulently issued stock from Retrophin (RTRX) to pay disgruntled investors and non-disclosure

Read more about bad trades gone semi ponzi here.

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

metropolis towers dtla eb-5 los angeles trevericapital SEC lawyer charges

Planned Metropolis Towers DTLA

EB-5 is quite popular here in the Los Angeles area.  Most of the construction downtown Los Angeles is from Chinese EB-5 money.  It definitely attracts multiple participants because of the money involved.  Although there is big money to be made in EB-5, it is highly regulated and difficult to successfully do.

EB-5 is a way for an immigrant (popular with wealthy Chinese) to get a greencard by bringing in money and following strict guidelines. If all guidelines are met, they get a greencard in a few years. This is where it gets tricky.  The general EB-5 guidelines are they need to bring $500K-$1M into the US and generate a minimum of 10 new jobs for 2 years for a new commercial enterprise. What does this mean?   Multiple professionals are needed to align these moons.

To do these deals, a lawyer is needed and somebody with good deal flow.  Why is the deal flow so important?  It’s important because of sustaining 10 jobs for 2 years. That means the project being done as a deal must not fail or eliminate jobs.  If the project fails, then no greencard.  Also, if done incorrectly, you can be in violation of securities laws.

Recently, the SEC charged EB-5 lawyers for being unlicensed securities brokers and in violation of the 1933, 1934, and Exchange Act. Not only did the lawyers charge their normal fees to the client, but they got commissions for the deals without disclosing this to their client.

These EB-5 lawyers that violated the securities laws are another example of why it’s so important to have transparency, full disclosure, and regulators watching after the general public.

 

Disclaimer: Information contained herein is for informational purposes only and should not be construed as an offer, solicitation, or recommendation to buy or sell securities, or personalized investment, tax or legal advice. The information has been obtained from sources believed to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. Authors may own the stocks they discuss. The information and content are subject to change without notice. TreveriCapital LLC is a California registered investment advisor.

The CFTC ordered a monetary penalty and permanently bans Garen Ovsepyan, Sharpe Signa LLC and Haeres Capital LLC from the commodities industry.  The ban was for misrepresentation of $145 million vs $15 million assets under management (AUM).  Also, the forex trading advisor was not registered as a CTA and claimed a false exemption from AUM.  Link to CFTC Fraud.

With all these Unicorns lately, the market for private stock has been getting hot.  The SEC has alleged that NetCirq has violated federal securities laws regarding transactions involving Pre-IPO companies, swaps, and registration requirements.

overcrowded-unicorns-trevericapital-pre-ipo

 

 

The RIA model is growing fast right now primarily from technology and the premium service given to the clients.  Instead of being in a wire-house with out dated technology and pricing models or online broker dealers with less service, RIA’s are dominating the marketplace for wealth management!  I will be starting my journey to building an asset management firm catering specifically to client needs for wealth creation.

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