Think We’re the Most Entrepreneurial Country In the World? Not So Fast

October 3rd, 2012 § 0 comments § permalink

We’re the venture-capital capital of the world, but start-ups and young small businesses play a lesser role in America’s economy than in many other rich nations.

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Skype co-founder Niklas Zennstrom, a Swedish entrepreneur, speaking at an event in Dublin. (Reuters)

America’s entrepreneurial streak as one of the things that, theoretically, is supposed to make us exceptional as a country. At least it is if you listen to most politicians. But how do we actually stack up with rest of the world when it comes to building our own businesses?

We are, in fact, pretty unexceptional.

A Start-up Rate Lower than Sweden’s (and Israel’s, and Italy’s…)

Entrepreneurship is still a bit of a blurry area of economic research, and (as you’ll soon see) using different standards to measure it can yield radically different results. But one popular approach among economists is to count how many new businesses with paid employees start up each year, then divide them by the number of companies that are already up and running. The Organization for Economic Cooperation and Development, an international research outfit that specializes in side-by-side comparisons between different economies, calls this percentage the “employer enterprise birth rate.” Others just call it the start-up rate. But whatever you name the measure, the United States scores fairly low on it. We’re second to last, for instance, on the OECD graph below, which looks at the years 2007 through 2009.

But hey, at least we beat Canada.

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There isn’t a whole lot in common between the countries that outperform us. Sweden is a wintery, socialist wonderland. Brazil is the growth powerhouse of the tropics. Israel has a giant public sector, but prides itself on its tech scene. Italy and Spain are the Latinate basket-cases that might bring down the euro. All told, it’s hard to draw any overarching conclusions about why all these places finish ahead of the U.S. The countries that fare best on this measure tend to be poorer, which may simply mean that it’s easier for them to grow since they’re starting with a smaller corporate base. Yet that doesn’t explain away our ranking vis a vis wealthy nations such as Sweden, Austria, or the Netherlands.

New Businesses Don’t Make Up a Large Portion of Our Jobs 

The U.S. does produce proportionately more large start-ups than its peers nations, according to the OECD, and new businesses have a much better than average chance of surviving at least two years here. But they don’t appear to play a uniquely large role in job creation. According to Marion Ewing Kauffman Foundation, brand newborn companies were responsible for about 3 percent of all U.S. jobs in 2005. By 2008, it was closer to two percent. In either case, that would place us toward the middle or bottom of the OECD rankings shown below — leaving us in the range of Finland and Sweden.

In short, start-ups with employees aren’t a particularly large part of America’s corporate landscape, nor do they add much more to employment here than anywhere else. What makes this situation even more remarkable is that, unlike some other countries, the U.S. has many, many small businesses where the only “employee” is also the owner. Freelancers, consultants, one-man-band landscapers, and the like often incorporate for liability and tax purposes. As the OECD notes, that should inflate our start-up rate.

There are some studies of global entrepreneurship where the U.S. leads the pack. When the World Bank tallied up the average number of newly registered limited liability companies across the globe between 2005 and 2009, it found we had one of the highest startup rates per 1,000 people, in a league with Canada, Australia, and the United Kingdom (as shown in the map below, where the darker blue a country is, the more new companies formed there).

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The U.S. also finished tops for entrepreneurial activity among advanced countries in the Global Entrepreneurship Monitor’s 2011 annual report, which makes estimates about start-up businesses formation across the world based on a 140,000 person survey. By their account, about 12 percent of U.S. adults run businesses that are less than three and a half years old, compared to 6.9 percent on average in other so-called “innovation-driven” economies. One reason this study might find such different results from the OECD is that the survey counts any kind of business, whether or not it pays employees, as entrepreneurial activity. That’s a big deal in the United States, where about three quarters of all firms have zero payroll. Those businesses often belong to self-employed individuals who haven’t needed to incorporate.

Starting Businesses Out of Desperation

Which brings us to one of the sadder realities of U.S. entrepreneurship. According to GEM’s findings, a very high percentage of U.S. new business owners report starting their own companies not because they had a great, innovative idea or because they truly wanted to be their own boss, but out of necessity. There’s a disconcertingly large group of Americans who have gone to work for themselves only because nobody else will hire them.

That fact is illustrated below. The blue bars track entrepreneurship rates among all adults. The red lines track the percentage of entrepreneurs who created businesses because they lacked other options. In the U.S., those entrepreneurs make up about 21 percent of the total, putting us in a league with Greece, Spain, Ireland, and conglomerate cultures like Japan and South Korea.

Hold on! you’ve probably said by now. So far, we’ve only talked about the sheer quantity of start-ups America produces versus other countries. What about the wonderful innovations they engineer?

Our Young Companies Aren’t Unusually Innovative 

And you’d have a point. Some of the most cutting-edge young companies in the world call Silicon Valley, New York, and Boston, and Austin, Texas home, partly because we have the financial backers to support them. According to the OECD, the U.S. ranks second overall in venture capital invested as a percentage of GDP, which wedges us between Israel at No. 1 and Sweden at No. 3. In sheer dollars, we dwarf everyone. That said, it’s not clear all that money floating around makes our start-ups much more creative. The OECD ranks us ninth out of 22 for the number of start-ups younger than five years old that issue patents, adjusted for the size of our economy (Denmark leads on that measure).

Nor do our entrepreneurs seem to consider themselves particularly innovative. About thirty percent of new business owners told GEM that they were marketing something that qualified as an innovative product, placing us in the middle of the advanced economy pack (on the right in the graph below, which you can click for a much larger version). This result might be a function of the fact that the U.S. already has so many businesses. For the purposes of the survey, an innovation just meant something new to the local market, meaning a great Jewish deli, for instance, might count as an innovation in Taiwan, but not in the United States. Then again, France has a lot of businesses too, and they outrank us. The results certainly don’t give us any reason to think U.S. start-ups systematically out-innovate their international cousins.

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Perhaps all of this might seem a bit nit-picky to. So we’re not the most entrepreneurial nation. So our start-ups aren’t unquestionably the most innovative. Americans still has a fairly strong, if weakening, tradition of creating businesses from scratch and trying to support those who do. But here’s the what’s important to remember: we don’t have a monopoly on entrepreneurship. Many other economies — all with different tax structures, safety nets, and regulatory regimes — seem to be just as exceptional as we are.

Why students should take over kickstarter

September 21st, 2012 § 0 comments § permalink

WHAT CAN CROWDFUNDING DO FOR JOBS IN AMERICA?

September 13th, 2012 § 0 comments § permalink

5 Mistakes to Avoid in Crowdfunding Campaign

September 10th, 2012 § 0 comments § permalink

Per every great success it exist a great number of collectively financed projects that fails. The good news is that in lots of cases the motives are moved by avoidable mistakes.

The crowdfunding phenomenon is creating every time more interest among economical and marketing analysts. Spectacular campaigns as Double Fine Adventure that raised in a month more than 3 million dollars with the fund of 87,139 people to the creation of a videogame don’t stop getting the specialists astonished.

Scott Steinberg, a leading expert on the worth of new tech trends to improve the business strategy and the familiar life, recently published “The Crowdfunding Bible”. In his book, Steinberg identifies some of the most frequent mistakes campaigns make so they don’t reach its goal:

 1. Absent identity

Let’s begin from the base that most of the authors of projects don’t have a public trajectory, neither brand nor celebrity. A primordial dare is then being able to count who the most honest possible are. The link and a trustable identity creation are crucial in a virtual world where the good ideas got spread.

 2. No one can get your message across

The expert affirms that exist a lot of examples of campaigns that generates a good traffic and diffusion but sadly they don’t reach the money enough because of a lack of clarity on the goal. The possible patrons left with conceptual doubts and lazy ideas about the concrete objectives of the project. The advice is that if having doubts in the definition of your project, stop. Better plan it with more time, make pretests to know if the message is understood and to know if people can get it across with clarity and energy.

 3. Nothing differentiates you from the competence

In the entrepreneur world, a lot of creative and talented purposes live together. Why someone should give money to yours and not to another one? As in any campaign you have to seduce or convince them somehow to make them prefer you. A good example of this, Steinberg says, was the case of the Pebble E-Paper Watch. Under the invitation: customize your perfect watch with solely downloading an app, got over 10 million dollars fund when the initial goal was reached in two hours. One of the secrets of the exit, was considering the suggestions and the participation of the followers to improve the product.

 4. No connection…

Sometimes what fails is the community arrival, due to that public relationships, marketing and communication tactics in social nets are not enough or not efficient at all.

So sensitize the patrons it’s necessary to feed the feedback, offer exclusive rewards, have a catchy video, link with other creators or public characters. You have to know to hear what’s on the other side, and adjust strategies. The daily dialog with the followers and funders is fundamental; you should get the idea that you are in campaign, as a presidential candidate does.

 5. The goals sound utopian

How much is too much to ask? Experts say that the more realistic the figure is, the more likely to collaborate will the funders be. Something to count with is that the amount you can get isn’t necessarily your only revenue income to your project. Think of diversify the income to the resources you need. Crowdfunding makes reference to: begin your project, end up your project or use the raised to something specific, like a promotion event to your project.

Practical Advice for Raising Early Stage Venture Capital

September 9th, 2012 § 0 comments § permalink

Most great businesspeople I’ve met would correctly advise an entrepreneur to avoid raising money if possible. Easy for them to say, right? But there are good reasons to bootstrap. First, you maintain control of the company. Second, maintaining control allows you to experiment and learn where the business is “naturally” going. Third, if you own the company, you can have a great exit at a low price. Fourth, if you’re able to build the company without significant outside capital that may mean your business has even more “real” legs.

But raising venture capital is sometimes a great idea. If your business has high velocity, high margins, and a huge market, venture may be a good road for you. There are some helpful resources out there on venture terms, good venture funds vs. bad ones, and questions you may want to ask a venture capitalist if you meet one.

The notes below are practical working tips on how to go about navigating venture capitalist conversations. Some of these might be surprising or seem hard to follow. But, in my experience, they’re good medicine.

1. Never start your fundraising process by meeting the top funds first. When you are ready to raise money, scratch Sequoia, Kleiner, and maybe one or two other top dogs off your preview list. It’s hard to overstate the herd mentality of the venture community. If the top guys pass, everyone below them will be too afraid to do otherwise. Get your practice reps in with easier audiences.

2. Don’t respond to inbound inquiries from anyone but a partner. Many entrepreneurs are excited or flattered when they hear from associates or analysts at venture funds. Don’t be. An “associate” at a venture fund is not a venture capitalist; she is an outbound prospector. Junior members of VC teams are paid to source information about companies. Their job is to make contact, extract information from you, get a PowerPoint deck, and build a profile of your business and industry. They are not qualified or authorized to do deals. If a junior member of a venture firm recommends your company to her superiors, it may actually be a negative signal inside the fund rather than a positive. Wait to connect with partners. (Depending on the firm, exceptions can be made for individuals carrying the title Vice President or Principal.)

3. Ignore post-ding feedback. If a fund decides to pass on your deal, discount any feedback the firm representative gives you. Her only goal in this circumstance is to avoid having you go ballistic about her on TheFunded or a comparable site. She will easily lie to accomplish this goal, and her stated reasoning for saying “no” will fall into one of a half dozen “avoid an argument” categories designed to let you down without hating her or having grounds for calling her an imbecile should your business succeed. Feedback you should heed more closely is from funds that are expressing genuinely positive interest in your company, but who are urging you to develop your business further, move in direction X, or fill gap Y in your executive team.

4. Never send your presentation or deck before you meet the venture team. This is non-negotiable. Many fund representatives will tell you that they don’t meet with entrepreneurs unless they have seen a deck first. False. Every fund does. Be extremely polite and decline to send a deck in advance. Some venture guys will give you grief. Some may even make noises about not meeting you without receiving a deck in advance. Stand your ground. Even after you meet them in person, you should only ever send an electronic version of the deck after you feel very comfortable with them. Until that time, you should assume that they will a) use your deck to compile a picture of your industry, b) share your deck with their portfolio and/or their friends and your competitors (yes, many absolutely do this routinely even though they promise they won’t), and c) develop a file on your company. You should assume that you are simply fodder for trendline generation until you have a specific reason to believe otherwise. (By the way, for full disclosure, on the few occasions I’ve broken my own rule in the past, I’ve always regretted it. By contrast, I’ve never regretted following this rule.)

5. Don’t be psyched that you “got” a meeting with a VC. VC’s livelihoods depend on deal flow. That means they pretty much must see you, assuming the summary description of your business passes a super simple sniff test.

6. Don’t meet with the third parties they want you to meet. A typical next step for a VC is to recommend that you get together with one of their portfolio companies or an unattached executive with whom they “work” frequently. Politely decline. There are three reasons the VC wants you to take the follow-up meetings. First, they want to extract more information about your business and you. Second, the venture capitalists want second opinions. VCs are famously cowardly decision-makers: except for the most successful handful, VCs have difficulty making up their own minds, and they seek shelter in third-party approval. Third, VCs sometimes send companies to unattached senior executives to compare notes on a commonly known entity and thereby evaluate the executive’s acumen, not the company’s prospects. Basically none of these reasons benefit you. Therefore, unless you really want to meet the third party for your own reasons, you should beg off.

7. Be careful before you take “quickstart” funds or join formal “incubators” within established venture firms. A new class of “superangel” funds has appeared (Floodgate, First Round Capital, etc.) which have challenged the historical primacy of established funds in getting the “early” seed and A round deals. Early rounds are the riskiest, but they also provide the huge returns that make venture capital firms famous. Superangels have been able to snag much of the best deal flow because they have more streamlined decision processes and friendlier deal terms than established VCs. To fight back, some of the bigger funds have openly or secretly created “quickstart” or incubator seed funds that allow a subset of their partnership to authorize a convertible note-style investment of a few hundred thousand dollars. It’s a great idea, actually, and it seems to have worked in some cases. However, a tragic flaw has materialized. If you don’t get full and visible support from your incubating/quickstarting fund — to the effect that they will invest even if no one else does — the investment community is all too likely to think that the fund knows something that they don’t, and your deal may become unattractive to any potential investor.

8. Keep three to four friendly arms-length funds up to speed on what you’re doing on a quarterly or semiannual basis. Consider them your “investor council.” Give them enough information so they can give you helpful feedback. Listen for commonalities among the comments, and listen for changes over time. Test out your company narratives and solicit ideas for new ones. It’s likely enough that your eventual investor will come from this group: because they know you, they’ll be able to reach an investment decision faster, and you’re more likely to feel comfortable with them. Fair warning, though: keep the group limited to three or four funds. Any more, and you risk making your deal feel “shopped” before you have even decided you want to raise money.

However you do it — with or without venture capital — good luck building your business.

SEC Proposes Rules to Implement JOBS Act Provision About General Solicitation and Advertising in Securities Offerings

September 7th, 2012 § 0 comments § permalink

Washington, D.C., Aug. 29, 2012 – The Securities and Exchange Commission today proposed rules to eliminate the prohibition against general solicitation and general advertising in certain securities offerings.

Under the proposed rules, which are mandated by the Jumpstart Our Business Startups Act, companies would be permitted to use general solicitation and general advertising to offer securities under Rule 506 of Regulation D of the Securities Act and Rule 144A of the Securities Act.

“I believe that the proposed rules fulfill Congress’s clear directive that issuers be given the ability to communicate freely to attract capital, while obligating them to take steps to ensure that this ability is not used to sell securities to those who are not qualified to participate in such offerings,” said SEC Chairman Mary Schapiro.

The Commission will seek public comment on the proposed rules for 30 days. Shortly thereafter, the Commission will review the comments and determine whether to adopt the proposed rules.

FACT SHEET

Eliminating the Prohibition on General Solicitation and General Advertising in Certain Offerings

Background

The Current Offering Process

Companies seeking to raise capital through the sale of securities must either register the securities offering with the SEC or rely on an exemption from registration. Most of the SEC’s exemptions from registration prohibit companies from engaging in a general solicitation or general advertising in connection with securities offerings – that is, advertising in newspapers or on the Internet among other things. Rule 506 is one of those exemptions.

JOBS Act

The JOBS Act, enacted earlier this year, directed the SEC to remove the prohibitions on general solicitation or general advertising for securities offerings relying on Rule 506. By requiring the SEC to remove these restrictions, Congress sought to make it easier for companies to inform the public that they are seeking to raise capital through the sale of securities.

In particular, Section 201(a)(1) of the JOBS Act directs the SEC to amend Rule 506 to permit general solicitation or general advertising provided that all purchasers of the securities are accredited investors. It also says that “[s]uch rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission.”

The new law also directs the SEC to revise Rule 144A, which governs the resale of securities primarily by larger institutional investors known as qualified institutional buyers (QIBs). Under current Rule 144A, offers of securities can only be made to QIBs. Under the new law, Rule 144A would be revised so that offers of securities could be made to investors who are not QIBs as long as the securities are sold only to persons whom the seller reasonably believes are QIBs.

The Proposed Rules

Rule 506

Under the proposed rules, companies issuing securities would be permitted to use general solicitation and general advertising to offer securities, provided that:

  • The issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors.
  • All purchasers of securities are accredited investors, because either:
    • They come within one of the categories of persons who are accredited investors under existing Rule 501.
    • The issuer reasonably believes that they meet one of the categories at the time of the sale of the securities.

Under Rule 501, a natural person qualifies as an accredited investor if he or she has individual net worth – or joint net worth with a spouse – that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person. Or, if he or she has income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

In determining the reasonableness of the steps that an issuer has taken to verify that a purchaser is an accredited investor, the proposing release explains that issuers are to consider the facts and circumstances of the transaction. This includes, among other things, the following factors:

  • The type of purchaser and the type of accredited investor that the purchaser claims to be.
  • The amount and type of information that the issuer has about the purchaser.
  • The nature of the offering, meaning:
    • The manner in which the purchaser was solicited to participate in the offering.
    • The terms of the offering, such as a minimum investment amount.

The SEC’s proposing release notes that proposing specific verification methods that an issuer must use “would be impractical and potentially ineffective in light of the numerous ways in which a purchaser can qualify as an accredited investor … We are also concerned that a prescriptive rule that specifies required verification methods could be overly burdensome in some cases, by requiring issuers to follow the same steps, regardless of their particular circumstances, and ineffective in others, by requiring steps that, in the particular circumstances, would not actually verify accredited investor status.”

The proposed rules would preserve the existing portions of Rule 506 as a separate exemption so that companies conducting 506 offerings without the use of general solicitation and general advertising would not be subject to the new verification rule.

Rule 144A

Under the proposed rules, securities sold pursuant to Rule 144A could be offered to persons other than QIBs, including by means of general solicitation, provided that the securities are sold only to persons whom the seller and any person acting on behalf of the seller reasonably believe is a QIB.

Form D

The proposed rules would amend Form D, which issuers must file with the SEC when they sell securities under Regulation D. The revised form would add a separate box for issuers to check if they are claiming the new Rule 506 exemption that would permit general solicitation and general advertising.

Join the Crowd

August 28th, 2012 § 0 comments § permalink

The link below is to a BBC radio Radio Broadcast programme by Peter Day.

‘Short of cash to start a business? More and more people are using the internet to get customers or would-be investors to make their projects happen. Peter Day reports.’

Join the Crowd

Short of cash to start a business? Instead of going to the bank for a loan, asking for cash from friends or family, or meeting with venture capitalists, how about asking hundreds or thousands of strangers on the internet to buy your product or a share in your company?
It’s called crowdfunding, and it’s a strategy that was first adopted by filmmakers and musicians. Now more and more businesses are using crowdfunding websites to raise capital.
Peter Day meets some of the businesses turning to this innovative form of fundraising as well as some of the founders of high-tech companies matching up entrepreneurs with investors.
He also finds out more about the potential risks and asks whether crowdfunding will remain a niche business tool or an idea that will transform the way entrepreneurs raise money.
Producer: Mike Wendling
Editor: Stephen Chilcott.

 

Beyond crowdfunding: Why Regulation A reform is the most vital piece of the JOBS Act

August 13th, 2012 § 0 comments § permalink

Since its enactment, most of the discussion of the Jumpstart Our Business Startups Act(JOBS Act) has centered on crowdfunding and the IPO onramp provisions of the Act. However, the legislation’s expansion of Regulation A actually promises to have the greatest impact on small and mid-sized business capital formation.

In theory, Wall Street has always been available to American businesses of any size seeking to raise capital. But in practice, for a host of reasons related to expenses andregulatory burdens that have grown exponentially in the past two decades around initial public offerings, only the largest companies have had access to Wall Street.

“Main Street” businesses looking for capitalhave been limited to privately issuing debt or equity securities with individuals and private fund investors, under significant restrictions on the securities’ resale.

Making matters more complicated, to buy these securities, investors must be limited in number or meet significant net worth or earnings thresholds to be classified as “accredited investors.” The Dodd-Frank legislation effectively increased the net worth requirements for accredited status, and indications suggest that the private placement market has shrunk by at least 30 percent as a result of that change to the law.

Alternatively, there has long existed an exemption from the traditional IPO process, known as Regulation A, which permits a company to issue up to $5 million of securities per year in offerings that are free from the resale and investor restrictions associated with privately placed securities. However, because of the annual dollar amount limitations, a robust market in Regulation A securities has never developed.

Old regulation, new opportunity

The JOBS Act expands Regulation A’s annual dollar limit tenfold – from $5 million to $50 million. Here’s why this expansion will be a game changer for small business capital formation:

• Public solicitation: Offerings are issued and sold publicly, and companies are permitted in many instances to solicit interest in their offerings before filing with the Securities and Exchange Commission (SEC). Therefore, small businesses will now be able to connect with potential investors more easily.

• Freely tradable: Trading Regulation A securities is not restricted, much like traditional, publicly held securities (such as stocks and bonds). This flexibility, when combined with the increased size of Regulation A offerings, should attract more investors to small business offerings. In addition, the growth in size of these offerings should encourage the development of disciplined, sophisticated markets for real liquidity at the “Main Street” level.

Main Street Impact

What this means to small businesses across the country is that they will be able to access needed capital without having to conduct an IPO or complying with the significant restrictions on resale. In addition, because the accredited investor requirements do not apply to investors in a Regulation A offering, there will be a larger pool of potential investors, many of whom will now be less hesitant to invest in smaller offerings.

Regulation A likely could become the dominant avenue for small and medium-size businesses to form capital. Moreover, as those businesses grow, funded by the capital from their Regulation A offerings, they will find appealing the IPO onramp. The onramp provides a means to increase the amount of capital they can raise without the necessity of a traditional IPO and the costly regulatory compliance burden to which publicly held companies are subject.

With what is expected to be an exponential increase in the use of Regulation A to form capital, there is every reason to believe the financial markets will develop a robust secondary market for these securities.

Still a ways to go

For the benefits of expanded Regulation A to be realized and put into practic, the JOBS Actrequires the SEC to develop revisions of the rules governing the use of Regulation A. This will likely occur within a year’s time, if not sooner. We believe Regulation A is in the process of becoming a very viable vehicle for small, mid-sized and emerging companies to form capital, which will benefit the investor community at large.

Manchester United IPO: share prices cut before US stock market flotation

August 10th, 2012 § 0 comments § permalink

Shares will now be sold at $14, but sale is still expected to make it the most valuable football club in the world

Manchester United has slashed the price of its shares in advance of its debut on the New York Stock Exchange on Friday.

The club had been set to sell its shares for between $16-$20 (£10-£13) a share but cut the price to $14 late on Thursday following negative comments from Wall Street analysts and Facebook’s disappointing stock market debut in May.

Even after the cut, United will be valued at $2.3bn (£1.5bn), making it the most valuable football club in the world. Real Madrid, its closest rival in financial terms, is valued at $1.88bn, according to an annual ranking by Forbes magazine.

The shares are being sold by the Glazers, a US family who made their fortune with shopping malls and trailer parks and also own the Tampa Bay Buccaneers.

The Glazers bought United in 2005 for about $1,250m (£800m). They are selling 16.7m shares, equal to a 10% stake, and will raise about $330m (£210m). The family will net about $140m from the flotation.

The club claims a global fan base of about 660m and has won a record 19 league titles. Its share sale will be the largest sports listing on record, surpassing World Wrestling Federation’s $190m IPO in 1999, according to Thomson Reuters.

It will also be the most high profile since Facebook’s ill-fated debut on the Nasdaq stock exchange in May. The social network’s much hyped share sale proved a bust and shares initially sold at $38 are now worth $20.

Wall Street analysts have warned they believe United’s sale could also be a disappointment. “I’m calling this ‘son of Facebook’,” said David Menlow, president of the research firm IPOfinancial.com.

He said too little of the money being raised looked like it was going to be invested in the club, the club had too many debts and it wasn’t clear how it intended to grow as a business.

“Sports franchises have this emotional flourish, then everybody wakes up and wonders, ‘do I really want to own this’,” he said.

Sam Hamadeh, founder of New York-based analyst PrivCo, called United “a collectible not an investment”. “This is one for the rabid fan,” he said.

This is the Glazer family‘s third attempt at a share sale, having previously scrapped efforts to sell shares on exchanges in Hong Kong and Singapore.

Those sales failed as investors balked at United’s proposed dual class share structure. Under the US listing the family will retain control of the club through class B shares that have 10 times more voting power than the publicly-traded class A shares.

The company is also taking advantage of recently-introduced US laws that limit the financial disclosures it must make. United is raising capital as an “emerging growth” company under US president Barack Obama’s recently passed Jumpstart Our Business Startups, or Jobs, Act.

Old Trafford

The move means United will not be required to file quarterly reports or be subject to the same level of financial scrutiny as other US-listed firms for five years.

Some of the proceeds from the sale are expected to be used to pay down some of the 134-year-old club’s debt, which was last reported to be about $661m. But the Glazer family had originally claimed all the proceeds would go towards United’s debt, angering some fans.

A leading fan group has called for a boycott of the club’s sponsors in protest at the terms of the share sale.

A statement from the Manchester United Supporters Trust read: “The Manchester United Supporters Trust has today called for a worldwide boycott of Manchester United sponsors’ products, with support across the UK, Europe, Asia and the US. The boycott strategy is intended to send a loud and clear message to the Glazer family and club sponsors that, without the support and purchasing power of the fans, the global strength of the Manchester United brand doesn’t actually exist.”

6 companies eyeing IPOs next week

August 8th, 2012 § 0 comments § permalink

LOS ANGELES (AP) — One of the world’s top soccer clubs is set to make its stock market debut next week along with the companies behind Outback Steakhouse restaurants and the Carl’s Jr. and Hardee’s fast-food chains.
Manchester United Ltd., one of the most popular soccer clubs on the planet, is slated to go public with an offering that looks to bring in $300 million.
Bloomin’ Brands, which operates Outback, is looking to raise $300 million in its initial public offering.
CKE, which runs the two hamburger eateries, is eyeing a $200 million raise.
The timing of the IPOs coincides with the final week before many on Wall Street go on break until after Labor Day.
It also caps a summer IPO season that got off to a slow start due to the fallout from Facebook’s disappointing market debut.
Facebook shares began trading publicly on May 18 at the top of their projected IPO range, but ended up closing barely above their IPO price at $38.23 and have fallen sharply in the following weeks. They closed Friday at $21.09, down 45 percent from their starting price.
That has put a chill on the IPO market, and the next batch of market newcomers didn’t launch offerings until weeks later.
“Everybody was concerned about Facebook,” said Francis Gaskins, president of researcher IPOdesktop. “That took all the air out of the room for about five weeks.”
Since then, the IPO market has bounced back, with several technology companies and specialty retailers going public and doing well since their debut, Gaskins noted.
Retailer Five Below Inc. saw its shares close at a 55.9 percent premium to its debut price on July 19. A day later, the stock of travel-booking website Kayak jumped 28 percent in its first day of trading.
“There’s a big backlog of IPOs, and after Labor Day, as long as the markets don’t tank, the IPO market is expected to come back strongly,” Gaskins said.
Shares of Tampa, Fla.-based Bloomin’ are expected to be priced between $13 and $15 each. While shares of Manchester United are projected to be priced between $16 and $20 apiece.
CKE, based in Carpinteria, Calif., is expected to see its shares priced between $14 and $16 each.
Peregrine Semiconductor, a technology firm catering to wireless market, is looking to raise $83 million; Performant Financial, which handles collection services on unpaid loans, wants $150 million; and, Stemline Therapeutics, a biotech company, is eyeing a $42 million raise.