Wednesday, August 1, 2012

Middle Market Firms of Europe

For the last several months I have been working with GE Capital on a research project involving mid-market firms in the big-4 European countries: Germany, UK, France, and Italy (EU-4). So far we have published three reports--one for overall EU-4 and one each for Germany and the UK. Soon we should release reports for Italy and France too.

To download the reports, head over to GE Capital UK or read the EU-4 report below. Here is a nice video summarizing the findings

The Mighty Middle - Europe

Friday, May 4, 2012

Yahoo! CEO Caught Lying?

Yahoo CEO Scott Thompson has a bachelor's degree in accounting. However, according to his resume the degree is in computer science. This "mistake" was observed by Third Point LLC, 5.8% owner of Yahoo, and reported to the board via the following letter. Money quote:

"A rudimentary Google search reveals a Stonehill College alumni announcement stating that Mr. Thompson’s degree is in accounting only."

 Maybe Third Point is a major investor in Google too. Otherwise I would question why they didn't use Yahoo to search this ;)

Third Point Letter to Board May 3 Release

Thursday, February 2, 2012

Facebook IPO Prospectus

Facebook filed Form S1 with the Securities and Exchange Commission (SEC) yesterday. Here is the entire 202 pages prospectus.

Facebook IPO Prospectus

Tuesday, January 24, 2012

Private Equity and Job Creation

Mitt Romney has recently come under heavy attack from his fellow Republican candidate Newt Gingrich for Romney's earlier career in private equity. The argument is that private equity firms buy companies using large amounts of debt. They then lay off employees in these companies and engage in other cost cutting measures in order to generate cash to pay the interest on the debt. Finally, they pay themselves hefty fees and dividends, thereby sucking capital out of these companies and eventually running them into the ground.

Prof. Steven Kaplan of Chicago U., who is arguably one of the most knowledgeable persons when it comes to private equity wrote a two-part article summarizing the research on private equity firms (Part 1, Part 2). He emphasizes that private equity firms created substantial wealth for the investors. More importantly, there is no evidence that private equity leads to substantial job loss. For what it is worth, in many cases they lead to massive job creation.

The takeaway from all this is that a few vivid stories by the people who actually suffered can be exploited to create a completely different image. It of course can go the other way too. One can focus on only the good stories about private equity and conclude that private equity firms are gift to mankind. The truth, however, is not that straightforward. Of course you can say that I am coming up with this conclusion based on a story involving Mitt Romney, Newt Gingrich, and Steven Kaplan! You are is difficult to avoid the temptation! May be you will trust Tyler Cowen more than me.

Sunday, September 11, 2011

High Frequency Trading in the UK

The Foresight panel in the UK has released their working paper on the high freuqncy trading (HFT) consequences. The executive summary mentions

We identify three main mechanisms that may lead to instability when financial markets involve significant proportions of CBT: nonlinear sensitivities to change (where small changes can have very big effects), incomplete information (where some agents in the market have more, or more accurate, knowledge than others), and internal “endogenous” risks based on feedback loops within the system. 

The internal chains of cause and effect that are central to endogenous risks in CBT-markets involve positive feedback loops that can amplify and self-reinforce detrimental interactions between different aspects of well-intentioned management and control processes.

The feedback loops can even be worsened by risk-management systems, and can be driven by changes in market volume or volatility, by market news, and by delays in distributing reference data. 

A fourth cause of instability is social: a process known as normalisation of deviance, where unexpected and risky events come to be seen as ever more normal, until a disaster occurs.

Finally, in a world with multiple trading and pricing venues that are interconnected by CBT systems, the network topology determines the stability and the flow of information and trades, and hence is a major factor in determining overall systemic stability.

You can download this report and many other supporting documents from the Foersight's website here.

Monday, September 5, 2011

Marketing-Finance Interface: An Introduction for Practioners

This is a short presentation I am giving today to 20 executives who are part of the PGPX program offered by IIM-Ahmedabad, India. I first motivate why marketing-finance interface is important from the marketing metrics point of view. This is followed by a brief introduction of my own research as well extant literature in this area.

Monday, August 8, 2011

A KPCB Report on USA INC.

KPCB, one of the largest VC firms in the world, has released this report on USA financial status as if it were a corporation, USA Inc. You can check the video below. Also download the full 266 page report from below the video.

PDF Report

USA Inc. - A Basic Summary of America's Financial Statements