Wednesday Warblings

Wednesday Warblings
The sun is shining, yet another round of premature presidential debates are over and the ACG Boston Growth Conference is underway just a few blocks away from my spacious cubicle (if you advertise, I will shill). In other words, it’s time for some Wednesday Warblings.

A real grab bag today, as we haven’t done this for a while. First up are a couple of emails on the Amp’d Mobile situation.

Praveen: “I can’t believe that you continue to believe that this investment was worthy of the respect that you seem to bestow on it. I guess that even smart people have difficulty distinguishing investments that back fundamental innovations rather than momentum plays (such as investing in anything that addresses the youth market). Or, maybe people just get swayed by large sums of investments by big names. I’m sorry to differ, but the story would NOT make for a good subject for a book.”

Colleen: “Amp’d sounds like a poster child for why VCs should think twice before allowing strategic investors to become larger shareholders than the VCs themselves. The interest just too often are not aligned, with VCs wanting what’s best for the company as a whole (or at least for its value), while the strategic investors sometimes want what’s best for the corporation they represent (which sometimes has little to do with a company’s independent success).”

*** Morgan: “Now that you have a ton of emails about other listed private equity funds-of-funds, could you post the whole lot on peHUB?” Good idea. Give me an hour or two, and I’ll get it up.

*** PR pro Karen, on why I don’t always cover your/her clients: “Thanks for putting this in writing so my clients can see it. It makes it difficult for everyone when we find out about involvement in a deal five days after it has closed.”

*** A few emails related to last Wednesday’s column, on why buyout pros don’t really believe the caution they’re preaching. Andy: “Thank you for seeing past the BS that the Journal apparently accepted without thinking. If mega-firms are being cautious, then Pedro Cerano was a selective hitter at the beginning of Major League.”

Thomas: “I agree 100% that the boom will be ended by banks instead of by private equity firms. But you should emphasize that the banks won’t do it voluntarily either. You hint at it, but aren’t explicit enough. There will have to be a major macro-economic event that changes the entire lending market by force.”

But Oliver dissents: “Not quite sure I agree with your rebuttal to the Journal… The level of activity does not necessarily equate with aggressiveness. Some of the investments of late are in more defensive sectors.And against a market that has grown significantly, TPG is more cautious than others.”

*** Seth on fair-value accounting: “One thing not too many people are talking about is the effect on carry.Many funds have a clause that allows them to start paying out carry once they reach a value ~ 120% of cost.There’s a clawback provision so if the full fund isn’t returned or the total carry ends up being less than what was distributed, GP’s must return the money (assuming they have it), but FVA has the potential to significantly accelerate the point at which funds reach this threshold. My personal view is that funds shouldn’t pay out carry until they’ve actually returned the entire fund value (including management fees) to their LPs, but I think that view is in the minority.”

*** Finally, Lauren asks: “How do I send you an anonymous tip?” Just go here. Getting good tips are the best part of my day…