BLPA Rearview Mirror: Bulls Arrive, Bears Flee

September 15, 2014

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Source:  www.tybeebb.com Creative Commons
Source: www.tybeebb.com Creative Commons

What a bizarre summer. I’m already putting away my summer clothes, given the 40 degree nights, and making plans to store the patio furniture and am taking out the turtlenecks. How could this happen? I’m not complaining about the lack of air conditioning bills, but wait a minute!

Earnings and the Market[1]

[Click on the company name of the story and on the stock symbol for the stock chart]

Lots of muttering about the bears capitulating, though as I’m writing this, the DJIA has gone back below 17,000. But, just barely. We’re nervous when too many people are bullish. But we haven’t seen any extravagance; unemployment is still up there at 6.1 percent, though down from a high of 10.0 percent in October, 2009.[2] Just remember, the market performs better during periods of bearishness.

The bullishness is attributed to improving earnings, a pickup in economic growth and an accommodative Federal Reserve. The Fed is meeting this week, and we will be receiving more smoke signals on Wednesday afternoon.

The Alibaba IPO should be on the road. It’s a hot deal, with the price range being raised, in spite of the two tier stock structure and total control by Jack Ma and some evidence of self-dealing with himself and some of his top executives. The Chinese way, to those of us who are a bit jaundiced with regard to business dealings in China. Mr. Ma claims that Alibaba will be expanding into the U.S. and Europe: Broad-based or targeting people with a Chinese heritage?

On the earnings front, Yum Brands pre announced earnings and revenue shortfall in China due to their food sourcing issues. Ulta (ULTA: Nasdaq) continues to outperform. I should have listened to Peter Lynch and bought the stock. Great idea, good execution. Sales of $734m vs. $601m YoY, and earnings of $60.8m and $0.94 per share vs. $44.9m and $0.70 per share.

Restoration Hardware (RH: NYSE) fell when revenues and forecasts fell below expectations. Revenues were $434m vs. $382m YoY and earnings of $27.2m and $0.69 per share vs. a loss of $17.8m and $0.46 per share.

Lululemon Athletica (LULU: Nasdaq) posted sales of $391m vs. $344m YoY and earnings of $0.33 per share on net income of $48.7m vs. $0.39 per share on net income of $56.5m. The stock traded up due to exceeding expectations.

In mergers, Heineken’s (HEINY: Nasdaq) controlling family rebuffed SABMiller’s bid for the Company. Meanwhile, Minecraft maker Mojang is selling itself to Microsoft for $2.5b. Founder Maukus Persson, known as Notch, never went to college; Minecraft is based in Sweden. Another one of those data points.

FINRA is generating new trading rules to give greater transparency to private trading platforms and heightened oversight. A day late a dollar short? Michael Lewis wrote his best seller, Flash Boys, on the problem, and only now is FINRA beginning to address the problem. Closing the proverbial barn door.

IPOs[3]

(2 IPO’s)

Israeli-based Rewalk Robotics (RWLK: Nasdaq) sold 3m shares at $12 per share, raising $36m at a valuation of $138m. The Company’s stock is trading at $25.60 per share.

We are an innovative medical device company that is designing, developing and commercializing exoskeletons that allow wheelchair-bound individuals with mobility impairments or other medical conditions the ability to stand and walk once again. We have developed and are continuing to commercialize ReWalk, an exoskeleton that uses our patented tilt-sensor technology and an on-board computer and motion sensors to drive motorized legs that power movement.[4]

Germany-based Affimed Therapeutics (AFMD: Nasdaq) sold 8m shares at $7 per share, raising $56m at a valuation of $155m. The Company’s stock is trading at $5.70 per share.

We are a clinical-stage biopharmaceutical company focused on discovering and developing highly targeted cancer immunotherapies. Our product candidates are being developed in the field of immuno-oncology, which represents an innovative approach to cancer treatment that seeks to harness the body’s own immune defenses to fight tumor cells.[5]

Mergers & Acquisitions[6]

(7 transactions)

Click on the highlighted text for more deal information.

Software

Eucalyptus Systems, with open source private cloud software that is compatible with AWS, is being acquired by Hewlett-Packard for $11b.

Mojang,(Minecraft) is being acquired by Microsoft for $2.5b.

Fabrix Systems, a leading provider of enterprise class integrated storage and computing platforms for delivering DVR, video on demand and other services, is being acquired by Ericsson for $95m.

Idera, which has developed application and server management software, is being acquired by TA Associates.

Media/Marketing/Ads

Conversant, which helps marketers drive deep consumer engagement through digital marketing, is being acquired by Alliance Data Systems for $2.3b.

Polar, which does online polling for companies like HBO, TechCrunch and USA Today, is being acquired by Google.[7]

Eventjoy, a digital ticketing platform, is being acquired by Ticketmaster.

Mobile

UK-based Movirtu, a pioneer of Virtual SIM solutions for mobile operators, is being acquired by Blackberry.

Private Placements[8]

[8 transactions]

I will admit that DHgate.com has my interest.  How do you sell direct to consumer from China, and save money for the buyer, and make money for the seller?

Finance

Square, the payments firm run by Twitter founder Jack Dorsey, raised a $100m Series E round. Square runs those credit card swipers attached to the iPad/iPhone.

Marketing

Ifbyphone, a leader in voice-based automated marketing, raised a $30m Series E round.

FieldAware, which has developed field service management software, raised $24m.

Veracode, which has developed cloud-based application security, raised a $40m Series F round from Wellington Management. They will need the money, as their competition is HP and IBM. They are based in Burlington, MA and founded by former Symantec employees.

Mediamorph, which has developed a SaaS platform for distributing media and entertainment, raised a $10m Series B round

Materials

Liquid Light, which is using process technology to convert CO2 to major chemicals, raised a $15m Series B round. Are our pollution and global warming problems solved?

Retail

Kinnek, which is trying to disrupt small business purchasing, raised a $10m Series A round. Kinnek is a cross between a directory and a marketplace.

DHgate, a China-to-the-Globe B-to-B and B-to-C marketplace, raised a $16m Series D round.

Medical

Scholar Rock is discovering and developing a new class of biologic therapies, raised a $20m Series A round.

China

Snowball Finance, a finance-focused social media site, raised a $40m Series C round.

Innobuddy, an online learning platform with SmartStudy and SmartPigai websites, raised an $11m Series A round from Baidu. This is Baidu’s third online education investment.

SmartStudy.com, with a mission of helping young people learn, raised an $11m Series A round.

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All the best,

Margaret Johns

Founder & Chairman

 

Affiliates:

 

SiVal_Logo

 

 

 

Jan Robertson

SiVal Advisors, LLC

 

Bic Stevens

Stevens Capital Advisors

 

Chartworth2Chartworth

Susan Woods and Vlad Harris

 

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Margaret Johns is the Founder and Chairman of BlueLake Partners, a boutique M&A investment bank based in the Greater Boston Area. Prior to founding BlueLake she was an employee founder and Managing Director at Needham & Company where she worked in Corporate Finance in New York City and headed up its Boston office. She now lives in Londonderry, New Hampshire with her husband, 16 year old step-daughter and three pugs. When she’s not working with clients, FINRA or writing blogs she competes on the Granite State Penguins Masters Swim Team, skis, rides her bike or is out walking her pugs.

 

Content researched, edited and reviewed on a best efforts basis.

 

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We make no claim to being comprehensive in our review, as the contents are companies and topics we, ourselves, find of interest.

 

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This newsletter is currently being proofed by Dave Henshaw, which is much appreciated. Dave is my USMS swimming lane mate, and Granite State Penguin team-mate. He is retired from MIT, where he used to produce and proof their annual financial report. Exactly what we need.

 

 

 

[1] WSJ Morning Moneybeat

[2] Bureau of Labor Statistics

[3]Renaissance Capital

[4] Company S-1

[5] Company S-1

[6] TechCrunch and company websites

[7] Mike Elgin on GooglePlus

[8] TechCrunch and company websites