Elevation Partners to eke out a $25 million profit after sale of Palm 20
Wed, 28 Apr 2010 10:53 pm EDT 
While we won’t expect Elevation Partners to say anything about it until the sale is complete, it looks like they’re about to walk away from Palm with a small profit. This flies in the face of sensationalist claims of partner Bono (yes, of U2 fame) being “the world’s worst investor,” though we imagine he, Roger McNamee, and the rest of Elevation Partners had hoped to make a bit more off the deal. Just how much is Elevation set to get when all is said and done? $485 million, according to Venture Beat.
That amounts to 40% of the $1.2 billion that HP is set to lay down to snap up Palm. The story of how Elevation’s getting more than their 30% share of Palm is an interesting one. Elevation’s initial investment in Palm in 2007 was to the tune of $325 million, which wrapped up 25% of the smartphone maker under Elevation’s control. Elevation has twice in the intervening years invested in Palm stock, upping their total investment to $460 million.
So luckily for Elevation Partners and all their investors, they didn’t lose money on this deal. Of course, if they’d sold their shares late last year when Palm stock was trading over $18, they could have brought in close to $1.5 billion. Yes, you’re reading that right, a third of Palm used to be worth more than what HP is paying today. That’s what happens when expectations are tempered by reality.
20 Comments
They deserve it....they stuck out wit the underdog till the end
I wonder will Bono give the profit to charity ? LOL!!!!!!!!!!!!!!!
Thanks to Elevation Partners! Would WebOS exist w/o their investment in Palm?
"That
I'm glad they did... wish they would have made more. WHY? Because they took the risk. They believed in what they saw a LONG time ago. Good for them.
Oh Yea and they are the reason that Palm stayed alive a little longer!
lol that guy on the left didn't invest in Elevation PArtners. I checked the website. He's not on it...
Who is he?
That
Troll (c)
Simp(TM)
at least they aren't down. alot people are still down from the crash. i'm still down about 7%.
No, they did not make 25 mil on this.
Running a VC costs money. When they put in the investment (initial 325mil or the later two rounds), it costs money. The managing partners charge a certain fee per year. It has to hire accountants and lawyers.
When they eventually make the sale (to HP), again, they have to hire accountants, lawyers, and investment bankers. None of them are cheap.
It has been 3 years since the initial investment. My guess the real profit is around 10 mil - which is less than what they would get from treasury.
And no, they wouldn't get 1.5B if they sold at $18. Why? Because when you hold 1/3 of the company, if you sell all your shares, the share price would crash. They may get first 10 million share at $15/share, but if they sell, the share price would have plummeted to $7 or maybe even $3.
This was going to my point too. Elevation could never have sold their shares as that would have sent the stock price into an instant tailspin.
Kudos to them though for bringing webOS to the marketplace. Without them, webOS would be vapourware and I would not be holding an overclocked (800 mhz) Pre in the palm of my hands right now.
I LOVE MY PALM PRE!!!!
and who are you again im confused. According to my numbers too they got roughly around 25 million, what mathematical method are you using.
Profits aside (which is a ridiculous consideration in the world of tech and finance--it's all about profits), I feel like the webOS community owes Elevation Partners for basically funding the development of webOS! They may not be making out big, but Bono now becomes legendary in my book for something other than his music.
Thanks Elevation Partners!
In the world of investing, anything less than a 50% gain on an investment is considered to be very small.
$25MM is a lot of money, but it isn't much of a return. As noted above, they have costs associated with VC funding - and $25MM is only a 5.4% return on a 3 year investment. At the $10MM number, it drops to 2.2%. That's barely any return at all, and you could do better in other investments. Even lowly CDs returned more than this.
But VC funding is all about risk and rewards, and the chance of webOS taking off was high enough to warrant the risk. I'm glad EP got some minor return on this, and hopefully they can go after another great idea that we'll all like.
Is that true that Bono is one of Elevation Partners. That's pretty wild. What I find very interesting about that is that U2 is currently in a relationship with RIMM and Blackberry, who sponsored their tour last year and I believe this year as well. There was even a U2 concert App for Blackberry. Wouldn't it have been nice if U2 had hooked on with Palm instead of Blackberry. I doubt things would be different now, but who knows.
The band needed a way to offset the costs of the tour. Palm wasn't in a position to do that.