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Awful Deals
You might think the business of capital formation is fun and exciting. Actually it’s a steady grind where about half of the deals never get inked. It’s about lawyers and regulations. The road shows are just a pain in the ass. Getting folks to pony up money is not as easy one might think.
I worked on a deal years ago. The objective was to build a factory in Mexico. There were strong equity partners. Darling Delaware and a rising big shot, Carlos Slim were the backers. My job was to arrange the senior debt for the project.
Darling Delaware is a very successful company. They’ve been around for a century. Their business is rendering. The proposed new factory would also render.
The business plan was good. This was going to be a moneymaker. The problem with the deal was optics. Rendering is a nasty business.The raw material is cow guts and fat. The finished product is cooking oil.
The plan called for trainloads of guts to arrive at the new factory every day. The trains would come from all over Mexico and suffer delays. There were estimates on how much “spoilage” the delays might cost. All the details were spelled out with spreadsheets and pretty graphs for the potential lenders. The numbers were fine. But the thought of train cars filled with guts sitting on some side rail for a week or two put a taint on the deal.
The lawyers tried to dress up the documents. The words “Cow guts” were deleted and the word "Offal was" inserted:
Wikipedia
Offal refers to the internal organs and entrails of a butchered animal.
The lawyer’s trick did not work. When a black lined (edited) version of the offering document went out, investors just laughed. The deal quickly got nicknamed the Offal Deal. From there some smart guy renamed it again as the Awful Deal. That name stuck.
The Awful Deal did get done. But it was an awful deal to work on.
I bring this up in the context of Groupon and Morgan Stanley. The IPO for this awful deal gets priced tonight. It has been hacked back to a fraction of what was originally contemplated. I understand that the initial float will be only 16mm shares.
The size and pricing is designed to create a positive market “pop” tomorrow AM. That might well happen. But there is a boatload of stock that is on the shelf, a secondary is coming on this deal.
For the folks at MS, this was their awful deal. It might prove to be the same for investors.
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I lost that same smegma bet to a lady I worked with a couple of years ago.
Nice to see that old standard is still around.
BRUCE /// Did you happen to know, or work with Rick Farina back in the old days??? Rick is a good man. Now semi-retired and still up around Chicago.
By the way, we appreciate your always "thoughtful words" of wisdom in your generous posts. You take care and thanks for taking the time to contribute in a thoughtful way to ZH. I'm sure you teach a lot of folks some decent leasons. Take care, and good luck to you.
big yes to your second paragraph.
What we need is a Schweddy IPO http://www.hulu.com/watch/4156/saturday-night-live-nprs-delicious-dish-s...
Just got this in the mailbox, anyone else?
We are announcing the auction of the shares of Facebook, Inc. Class B Common Stock that our affiliated broker-dealer commenced today.
The final number of shares contractually committed for sale at this auction is 75,000 shares of the Class B Common Stock of Facebook, Inc. The reserve price is $30.00 and the auction will be conducted on a sealed bid basis. Buyers at the auction will be prequalified by the broker-dealer in advance and will purchase through a single investment vehicle, such that each Seller will contract only with this single entity.
A fat rendering deal...
Very Fight Club
Sounds like the Darling Delaware deal was perfectly solid: A company that's been around forever and makes an everyday product. It's just that the very unsexy manufacturing process of said product is something that no one wanted to be reminded of.
The Groupon deal actually sounds like just the opposite: A sexy idea/process (but likely a flash-in-the-pan product) that is probably past its 15 minute window to successfully monetize in the capital markets. And no one wants to be reminded what the chances are that they'll still be a going concern in a year or two.
Should be a flip-a-thon.
Going concern? Why look at all the barriers to entry, I say...
Leroy, where'd you put all those damn barriers to entry?
As Homer Simpson would say, "Mmmmmmmmmmm... Cow guts..."
Poop-On
IPO= Intestinal Poop Obstruction
Just more paper pushing!
Nothing gets manufactured. What is their product! More paper. Promises of deals.
Anybody stupid enough to bite on the IPO gets exactly what they deserve! A mouthful of paper.
offal deal sounds like a good way to get rid of the bodies of enemies of the narco state.
much more productive than dissolving them in acid.
i hear the kosher crowd uses mcdonald's franchises to much the same end.
Serial Killer Central
the organs of course go to israel.
Israeli Organ Trafficking and Theft: From Moldova to Palestine
I recall a promotional review meeting many years ago. I new marketing manager was presenting something he referred to as the B1G1F. After some minutes, the Sales VP spoke up and rather calmly explained that we do no refer to Buy One Get One Free as a Big If. We call it a BOGO (Buy One Get One). Please, don't present a marketing plan with a Big If ever again. Here's to Groupon and Morgan Stanley's Big If.
PS: Bruce, you should have pitched it as a soap making operation.
This is a great story. Thanks for sharing. Groupon is a monster. Start buying on the dips.
16mm shares, ehh? I did not know they could be printed in that size.
The equity casino riggers are really trying to entice retail back, but it's not working.
They even have their 'ooooh, me so horny!" ("me love you long time!") ringtones on.
Forget Awful Deal...
Let Goldman Sachs abuses their clients by selling them a "Shitty Deal"
www.youtube.com/watch?v=gLx2Xc1EXLg
you forgot to mention that they bet against the securities they just sold their clients, and didn't disclose it.
glitch in the matrix (double tap)
Rather read Bruce than Reggie.
Reggie throws in a free set of bifocals to each new subscriber. :-)
How about Bruce edits Reggie's stuff?
MS calling for a referendum on the IPO.
I wish you'd help raise some senior debt for a project of mine: Trice- "Pasta in the same size and shape as rice".
To test it's marketability, just take some unprepared pasta, break it up to mimic a grain of rice, and then mix it in about a 1/3 proportion with unprepared rice and then cook them both together, preparing just as you would the rice alone. From there, further creativity in preparation can be pursued.
Without getting into the market psychology of "something, anything, new", the combination of these starches are great for energy, digestion and dietary balance.
It's probably not an earth shaking creation, but in the long run it would produce more jobs and make more money than Groupon ever will.
Isn't that Rice-a-Roni?
What, no plastic? Your missing ingredient:
http://www.asianews.it/news-en/Plastic-rice-made-in-Taiyuan-20751.html
it's called orzo
Exactly.
err it's called orzo or rizoni.
http://en.wikipedia.org/wiki/List_of_pasta#Minute_pasta
dupe
Bringing the Groupon IPO to market when the market volatility is like tap dancing through a minefield suggests the MS crowd is loooking to have an excuse for why things went wrong before hand.
barliman
Thanx Bruce, I worked in the meat industry as well. (All over Canada and US back in the 70-80's) I still remember the smell of a gut dumpster.
I have an 80% off coupon on Groupon.
I see how it is, already got dibs on shorting the float, eh?
Bruce - you got paid for your "shitty deal" so what?! Cavet Emptor
Tonites "shitty deal" is almost guaranteed to rally 10-20%, get in the game or go home
My guess is you don't know what your talking about. To have even the slightest chance to play in this syndicate you have to start with $5mm on account with MS or Goldie. You have to be a long time client.
There will be zero allotment to the street. This stock has been spoken for. So yes, it will pop by a good amount. I said that in the piece.
I will get some of these shares. I will be out by the end of the day, one way or the other.
They have't sent me any groupons to redeem on this one.
Oh cry me a fucking river Bruce. Both of my brother-in-laws are venture capital guys. They are doing just fine. Wish my work was as "demanding" and I could afford to pay my people the same compensation.
groupon is joke. Coupons to stuff I don't need/want 60 miles from my house. Great.
pay full price. i don't care.
Right on! I live in the midwest and they kept sending me stuff for Boston.
Can't buy into this one, Bruce.
I'm obsessed with the Whoredashians.
WB7 -- I recall reading that Ms. Kim also had butt augmentation as well...looks as if she's now wearing those cheeks proudly.
don FYI. I was recently informed by my 12 year old granddaughter that she saw a show on TV where they
X-rayed Kim's butt live on TV and there was no sign of implants, case closed.
She has...an incredibly small head ;-)
WB7 you're the best! Can you contact me? my user name at yahoo please. I want a logo modified. Thanks!
William, we are not worthy;)
???? you made the biggest boob the smallest!
Ha!
I see you used Bubba's trick to make his Carp look bigger.
It's not the tits, it's the lower lip.