Back in 1982, David "Dave" Corriveau and James "Buster" Corley opened their first Dave & Buster's location in Dallas. They wanted to create a cool, interactive dining environment with an extensive selections of beers, signature cocktails and wines, quality food, and, of course, many video games.
All in all, the format has worked. In fact, in March 2006, private equity funds Wellspring and HBK purchased Dave & Busters. And now the company has filed to go public.
Currently, Dave & Busters has 49 units in 20 states and Canada. For the year ended March 2008, revenues came to $543.3 million and EBITDA was $81.4 million. The company has generated comparable store sales growth for 12 consecutive quarters.
In theory, private equity is a simple business. Basically, it's about buying a company at a cheap price and then eventually selling it for a premium. Oh, and because of the large amount of debt, you can essentially leverage the returns.
Of course, the folks at the Blackstone Group LP (NYSE: BX) know this game very well. In fact, they have been doing it since the late 1980s.
However, this raises an interesting question: If Blackstone wants to buy from you or sell an asset to you, should you be concerned? Does the firm know something that you don't?
It's a good question to ask. After all, about a year ago, Blackstone went public with much fanfare. Interestingly enough, it marked the peak of the private equity market. Yet, Blackstone was able to snag a cool $4.1 in the offering. Even the Chinese government invested $3 billion in the firm.
Hollywood veteran Robert Halmi and his son, Robert, helped to build an entertainment firm back in the late 1970s -- and it turned out to be a great success. In fact, by 1994 they sold it off to Hallmark Cards. Then, in 2006 Robert teamed up with Kelso (a private equity firm) to acquire Hallmark Entertainment, which was renamed RHI Entertainment (NASDAQ: RHIE)
And, this week, RHI has hit the public markets – pricing its IPO at $14 per share.
Essentially, RHI develops and distributes made-for-television content and mini-series. Last year, the company posted $232 million in revenues and adjusted EBITDA of $33 million.
A key asset is RHI's film library, which includes more than 1,000 titles (or 3,500 broadcast hours). No doubt, this is a big source of future cash flows. What's more, the company is expanding into new categories, such as video-on-demand and pay-per-view.
Some of RHI's customers include ABC, CBS (NYSE: CBS), GE's (NYSE: GE) NBC, Spike TV and USA Network. There are also deals with global broadcasters, such as Antena-3, M6, PROSIEBEN-SAT1, TF1, Seven Network and Sky.
Unfortunately, the IPO market has been rocky lately. As a result, RHI had a dicey start – with the stock price falling 3.57% to $13.50 in today's trading.
With the slowing US economy, it's been tough for retailers. Yet, there are some that are bucking the trend.
An example is Metropark, which is a fashion-conscious retailer focused on the 20 to 35 year-old demographic. Metropark believes that its market segment is underserved – and poised for much more growth, so today the company has also filed to go public.
In fact, the Metropark store environment is much like a stylish night club with regular live performances by disc jockeys and the sales personnel that are called "Style Consultants."
Some of the premium brands offered include: Acrylic, Affliction, Ed Hardy, English Laundry, Monarchy, Obey, Rock & Republic and True Religion.
No doubt, Metropark's growth has been particularly strong. In 2004, the company launched with four stores. Now, there are 43 stores in 17 states. From 2005 to 2007, revenues have gone from $11.5 million to $71.6 million.
Metropark also has a stellar management team. The company's CEO and founder, Orval Madden, was the mastermind behind Hot Topic Inc. (NASDAQ: HOTT).
The lead underwriter on the IPO is Goldman, Sachs & Co. (NYSE: GS) and the proposed ticker symbol is "MTPK." You can locate the prospectus at the SEC website.
It's a mouthful: non-destructive testing (NDT). Yet, it's a big market – and it is growing fast. Basically, NDT helps assure the structural integrity of critical infrastructure.
A top NDT operator is Mistras Group. This week, the company filed to go public.
Mistras has a strong team of scientists, engineers and technicians. There is also a suite of sophisticated software solutions.
Tesla Motors chairman Elon Musk said at a conference recently that he plans to take the electric car maker public by the end of 2008. Without having had an opportunity to look at the financials -- there hasn't yet been a registration statement or prospectus -- I would say that this is exactly the kind of IPO that investors should avoid.
I know, it's exciting and new. It's technology. It's stuff that could change an entire industry and quite possibly the world. As Musk said, "Thirty years from now the majority of new cars will be pure electric, not hybrid."
Exactly. Just like Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR). And all those internet stocks. And the hundreds of exciting new car makers a hundred years ago that captured the fancy of investors before they ended in bankruptcy.
Back in December, The Wall Street Journal reported on the resurgent demand for special-purpose acquisition companies, also knows as SPACs or blank-checks. These are companies that are taken public for the sole purpose of seeking to acquire another operating company. If they can't find one with in a set period of time, they return the money to investors.
I was skeptical, writing that "Sometimes companies that go public through this process can be good investments, but there's something investors need to keep in mind: A company that has been acquired by a SPAC has just been put up for sale and is therefore unlikely to be undervalued. If the sellers could have gotten more for it, they would have sold it to someone else ... in general, I think blank checks are something for investors to avoid."
Now, less than six months later, Wall Street has turned on SPACs, and the rapid growth in blank check IPOs of late 2007 and early 2008 has subsided. According (subscription required) to the Wall Street Journal, the glut of these IPOs in recent months has left hedge funds -- their primary investors -- tired of them and, more dangerously, there are so many recently-formed SPACs on the prowl for acquisitions that they're "bumping into each other."
Of course some SPACs will be tremendously successful, but, in general, I still think investors should look elsewhere.
Apollo Management, which is one of the largest private equity firms, has traded on Goldman Sach's (NYSE: GS) private exchange, GSTrUE OTC. Unfortunately, the shares are down 40% (since August). Of course, other alternative asset managers – such as Blackstone (NYSE: BX) and Fortress Investment Group (NYSE: FIG) – have suffered plunges as well.
So what's the next step for Apollo? Well, the firm plans to trade on the NYSE. The IPO filing calls for raising $475 million of capital.
Apollo got its start in 1990 and profited handsomely from distressed investments (keep in mind that this was after the buyout boom). Now, the firm manages $40.3 billion and has recently raised a fund for $12.5 billion. Over the past 18 years, Apollo has generated an impressive 29% net internal rate of return.
BlackRock (NYSE: BLK), which is a top global asset manager, is one of the few that has been relatively unscathed in the financial meltdown. The company avoided such things as subprime securities and was quite conservative with client portfolios.
As a result, BlackRock now has lots of flexibility. So, what to do? Well, the firm has put together an IPO filing for a fund of hedge funds (to raise about $500 million). The offering will be on the London Stock Exchange.
Basically, a fund of hedge funds is a platform where managers invest in various hedge funds. True, the fees can be high, but there are some key advantages, such as diversification and improved due diligence. Besides, BlackRock has proved to be a top-notch operator with understanding complex investments. After all, the firm is helping to deal with the management of a big part of the Bear Stearns (NYSE: BSC) portfolio.
Actually, BlackRock's fund of hedge funds is part of Quellos Group LLC, which the firm purchased last year. In other words, it looks like BlackRock may snag a nice return on this deal.
Capital One Financial Corp. (NYSE: COF) shares are trading higher this morning on news that yesterday evening's Visa (NYSE: V) IPO raised almost $18 billion. COF offers credit and debit card services co-branded with Visa. Visa this morning has soared above the pricing at $44 from yesterday and is currently around $60. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on COF.
After hitting a one-year high of $82.25 in June, the stock hit a one-year low of $37.41 in January. COF opened this morning at $51.65. So far today the stock has hit a low of $50.89 and a high of $54.46. As of 11:55, COF is trading at $51.85, up $0.36 (0.7%). The chart for COF looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just one month as long as COF is above $40 at April expiration. Capital One would have to fall by more than 22% before we would start to lose money.
It's going to be a historic week. First, we experienced the meltdown of a mega financial institution, Bear Stearns & Cos. (NYSE: BSC). Second, Visa was able to raise a stunning $17.9 billion for its IPO with the share price coming to $44, above the $37-42 range.
True, it helped that the Fed came to the rescue (with creative approaches to apply liquidity) and that the Dow surged 420 points Tuesday, the day of the IPO. There were also earnings optimism from Goldman Sachs (NYSE: GS) and Lehman Brothers (NYSE: LEH).
Even without these, though, Visa would have performed well. Simply put, it's a tremendous company.
It operates the world's largest payments processing system – leading in terms of transaction volume, payment volume and cards issued.
Recently, I've been getting too many emails and comments on my blog asking what I think of the Visa (NYSE: V) IPO. Listen, every single long-term investor should be interested in it. Until today, it's been one of the few remaining marquee companies around unavailable to our stock-obsessed society and aside from litigation risk, the company's got everything going for it.
It's got strong sales and transaction growth and more importantly, like rival MasterCard (NYSE: MA), it's immune to the current credit crunch, passing off cardholder debts to the banks. So, when others are sweating potentially catastrophic events like The Bear Stearns Companies Inc. (NYSE: BSC) and the potential collapse of other brokers like Lehman Brothers Holdings (NYSE: LEH), scaring everyone half to death, these guys are sitting pretty. This is also the main reason why MasterCard's stock has handily outperformed rivals American Express (NYSE: AXP) and Discover Financial Services (NYSE: DFS), two companies -- and stocks -- that are certainly feeling that credit pain.
There'll be plenty of other articles dissecting the company, but I find that in rare situations like these, it's best to think in terms of the general picture. Not because it's the right way to invest, but because it's the way most people do. And those most people are the ones who can really influence the stock price here.
Naturally, a rally like the one we've seen Tuesday -- spurred by a Federal Reserve rate cut -- can't go one, and today stock futures are indicating stocks may start the session with declines.
On Tuesday, the Dow industrials rose 420 points, or 3.5%, the S&P 500 added 54 points, or 4.2% and the Nasdaq Composite rose 91 points, or 4.2% after Lehman Brothers (NYSE: LEH) and Goldman Sachs (NYSE: GS) beat expectations when they reported earnings (despite reporting lower earnings), providing some relief after the collapse of Bear Stearns (NYSE: BSC). The Fed's rate cut of three-quarters of a percentage point also helped lift market sentiment.
Today, however, the same concerns are continuing to plauge the market, about the credit crisis and the mortgage sector problems. Without much economic data, investors will revert back to focusing on these problems as the dollar continued its fall against the euro, erasing most of yesterday's gains, "on speculation the worst U.S. housing slump in a quarter of a century will swell credit-market losses."
Sometimes in a period of uncertainty, a look back can provide some perspective. So here are a few highlights from BloggingStocks on March 16, 2007,a year ago today.
Back in 1982, David "Dave" Corriveau and James "Buster" Corley opened their first Dave & Buster's location in Dallas. They wanted to create a cool, interactive dining environment with an extensive selections of beers, signature cocktails and wines, quality food, and, of course, many video games.
In theory, private equity is a simple business. Basically, it's about buying a company at a cheap price and then eventually selling it for a premium. Oh, and because of the large amount of debt, you can essentially leverage the returns.
Hollywood veteran Robert Halmi and his son, Robert, helped to build an entertainment firm back in the late 1970s -- and it turned out to be a great success. In fact, by 1994 they sold it off to Hallmark Cards. Then, in 2006 Robert teamed up with Kelso (a private equity firm) to acquire Hallmark Entertainment, which was renamed 
and 
. He also operates 
With the slowing US economy, it's been tough for retailers. Yet, there are some that are bucking the trend.
and 
. He also operates 
It's a mouthful: non-destructive testing (NDT). Yet, it's a big market – and it is growing fast. Basically, NDT helps assure the structural integrity of critical infrastructure. 
Tesla Motors chairman Elon Musk said at a conference recently that he 
It's going to be a historic week. First, we experienced the meltdown of a mega financial institution, 
Citigroup
Naturally, a rally like the one we've seen Tuesday -- spurred by a Federal Reserve rate cut -- can't go one, and today stock futures are indicating stocks may start the session with declines.
Comfort Zone Investing: Exploit volatility with constant dollar investing
Merck earnings preview: No miracles expected
Apple reports Monday -- buy AAPL before earnings?
