Posts Tagged ‘IPO’
One day prior to going public, BrightSource Energy pulled their IPO citing challenging market conditions even though they priced in the middle of their range at $22. The last time I looked, the S&P 500 was up almost 8% year to date. It sounds like the market is challenging for solar companies that have executional risk. Obviously this is a big disappointment.
Over the last year, we have sharply reduced our investments in Greentech recognizing that although we have done well with Tesla Motors and SolarCity, we fundamentally don’t have the in-house expertise and experience to make large investments in this space. Instead we are turning our attention much more to Consumer Internet where we have the capability to make educated bets.
Investors are fleeing risky assets for U.S. government debt. The S&P 500 has fallen 13.2% in the last 5 days, and the VIX has jumped from the low teens to 48. As an example of this flight to quality, yesterday, LNKD fell 17.39% while KO (Coca-Cola) fell 2.47%. Clearly the market has closed for small to medium sized speculative technology companies that are still unprofitable.
So how are we feeling? Overall, we feel comfortable with our current portfolio. We do have some near term risk since we have two greentech companies that have filed an S1, and are likely to find the current market environment a challenging one for going public. We also are in the 6 month lockup period for LNKD which expires November 15. However our two largest positions, Facebook and Chegg, are probably well positioned for a less certain economic climate.
How does this impact our investing strategy? Yesterday I was taking advantage of the spike in the VIX to write September 17, 2011 puts for both GOOG at $500 and AAPL at $320 as well as writing a ladder of puts for the SPY, EFA and EEM. In the case of Google and Apple, I am getting paid more than 20% p.a. to take on the risk of buying shares in either company at 10%+ less than today’s price. Am I too early? Probably, but I suspect these will be good investments regardless of whether I am assigned the shares in mid- September. We do have a number of investments underway, and should be announcing two early stage international investments soon with one in Japan and one in Australia. But I do suspect that as long as volatility remains high, the hurdles for entrepreneurs to obtain financing will get higher.