Elevation Partners needs a capital lift? 24
Sat, 19 Dec 2009 10:59 am EST 
If it weren’t for guys named Bono and McNamee, we wouldn’t even have Palm or webOS today. The guys at Elevation Partners have invested $460 million into Palm, and that investment would net them only $40 million were they to sell today. A 9% gain isn’t the kind of thing that attracts new investors, and the folks at Fortune believe that Elevation is on the prowl for more money - no company wants to sustain, they want to grow, even investment firms.
With 70% of Elevation’s initial fund already invested and little demonstrable success to show for it, they’ll have their work cut out for them should they seek more money. Then again, they’ve got Bono and Roger McNamee. Those two, along with the rest of Elevation Partners’ board, are clearly in Palm for the long term. Like we said, selling today would net $40 million in profit, but just two and half months ago they could have turned that investment into $330 million in profit. That 75% gain would have been more to investors’ liking, especially given that Palm is expected to continue burning through cash at a steady clip as they expand Pre and Pixi distribution onto new carriers in 2010.
[via: Palm InfoCenter]
24 Comments
I wonder if Bono's Pre has the oreo twist like mine?
Bono and U2 use BB's! The last world tour was underwritten by RIM.
In its glory days palm shares reached more than 462 (year 2000) dollars a shares and more recently last year 1.14.
Well we know the sky's the limit. The shares can only go up. Very soon the App limit will be also. Or at least 7.1Gb.
9% isn't that bad for these types of investments. Right now, anything over 0 is considered pretty decent.
I would take 9% profit any day!
9% over two years and you'd take it? Some people don't set the bar very high.
Hey Boner, I mean Bono, why are you doing crackberry ads? How about a Pre ad, god knows we could use a good one.....
Derrick,
Read this thread to get a better estimate of how much Elevation's shares in Palm are worth, http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_P/threadvie...
I'll summarize the key post:
In October-ish 2007 they bought Preferred Shares that convert to about 38,200,000 common shares for $8.50/share (converted share). Up-front cost was $325,000,000.
In December 2008 they bought 100,000 "units" and in March 2009 they sold 49,000 of those "units" for a total purchase of 51,000 "units" at a cost of $51,000,000. Each unit cost $1000 and convert to common shares at a price of $3.25/share. Each unit ALSO allows EP to buy another 70 shares @ 3.25/share at some future date (warrants). So this works out to about 15,700,000 shares bought @ 3.25/share and, if they want it, another 3,570,000 shares @ $3.25/share at some future date.
In March 2009 Elevation ALSO took that just-sold $49,000,000 worth of "unit money" and bought Palm shares at the then-current price of $6.00/share or about 8,167,000 shares.
Finally in September 2009 they bought $35,000,000 worth @ $16.25/share or about 2,150,000 shares (we'll disregard any personal stakes by McNamee and Anderson).
So there ya have it - Elevation Partners various stakes in Palm - $460,000,000 spent for about 64-65 megashares or about $7.08/share, plus or minus due to all the rounding I used. The current stock price is about $11.65 so their cash ROI is (11.65 - 7.08) or about $4.57/share. Looking at it from a percent basis EP is sitting on a 65% ROI."
Seems that at least one seldom visitor has a better handle on Palm's finances than you (or Fortune) do.
You guys should understand enough about Palm's financials to identify these obvious errors when they creep into the mainstream press.
I should have included this bit, too.
"Not exactly-- EP's stake in Palm is worth $746.85 megabucks, not $500 million as stated in the "article." That'd be a 62% return on investment, while NASDAQ has dropped 10% or so since EP's initial involvement in Palm."
Sounds credible. I'm blog-comment convinced. If I say I agree will you not post this kind of thing anymore when you grace us with your seldom visits? Who cares what the ROI is? I'm reading this because there's a picture of Bono in a granny sweater.
Everybody should read the above post, then go have some eggnog and enjoy the holiday.
The current stock price is $11.65? I thought the Friday close was $10.17?
The post was written earlier this week. You can knock 15% off of the gain. Still over a 40% return for Elevation Partners.
I'm almost blog comment convinced. But it seems there's a lot of Wall Street overhead ignored. Still, I agree that numbers sound under estimated in the article.
As for EP ducking out, I'd hope that's not likely. It seems dumb (though painful) to quit just as Palm starts launching other places. Yeah, they're going to burn that capital, but it's also likely to have a solid impact on their earnings by this time next year. Hell, they're likely to inch back up to $15-$20/share if the investors hold their ground.
Thank You!!
Jakerome,
Your information is much appreciated. I hope Derek will post a BIG update to correct the misinformation.
Engadget's report on Palm has been much more neutral (and slightly favorable) than PreCentral's. It looks like someone is going for the kill. What amazes me is that journalists are supposed to show two sides to every story - these past series of posts by Derek have all been one sided. If he is trying to flame the fire, this is the wrong time to do it. Whether he posts a correction or not (on PreCentral's home page) will tell us a lot about what is going on!
Palm predicted that the second quarter revenue would be smaller and subsequent quarter sales will pickup considerably; and yet Derek is painting a negative picture of Palm. No one is asking for a rosy picture; but also, neither does one expect a negative deluge of news that are in part, misleading. Plus, every news should be balanced, positive or negative!
This is exciting to me! I am a fan of U2 and the "extracurricular" activities they've participated in the last several years. Now that I that I am aware that Bono has some hand in Palm's investments I will keep the faith that Palm won't let me down as they have in recent times!
GO PALM!!!!!
Thanks Derek!!!!!!!!!!
God Lord! and I was happy that Opera was ending!
Either way Elevation Partners are coming up in a bad Economy...
Thats my CS professor!!!!!!!!!!!!!!!! The second guy from the left! hahaha that's awesome
Don't EVA CALL MEH NUMBAR TWOOOOOOO >_
Bono or not bono, they have been greedy about getting more money from a very competitive market. They are going to burn more and more money to get some market share (look at the canadian market). They lost their momentum allowing Google and their android gaining market shares.
Lot of people on the European where waiting for a rapid launch of the palm pr
Palm predicted that the second quarter revenue would be smaller and subsequent quarter sales will pickup considerably; and yet Derek is painting a negative picture of Palm. No one is asking for a rosy picture; but also, neither does one expect a negative deluge of news that are in part, misleading. Plus, every news should be balanced, positive or negative! life experience associate degree | online degree program | quick degree . Yeah, they're going to burn that capital, but it's also likely to have a solid impact on their earnings by this time next year. Hell, they're likely to inch back up to $15-$20/share if the investors hold their ground. affordable degrees | Corllins University