David -
The 9 million you refer to is the 2.5 million investment...plus the 6.5 million purchase of e-support (which includes touchstone software/unicore biz).
This is already calculated in the estimation of NAV (as indicated below)
From Page 4 of Razo Report:
Public Companies
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EBLD - 100,000 Warrants - Exercise Price for TSSW = $1.00
Price at Report = $4.50 Market Value = $450,000
IPO Candidates:
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Partsbase.com - $650,000 Investment - Cost Basis = $2.50
Estimated IPO $14.00 - Estimated Value - $2,912,000
SupplyAccess.com - $510,000 Investment - Cost Basis = $1.50
Estimated IPO $20.00 - Estimated Value - $5,440,000
Total IPO Candidates = $8,352,000
Estimated Cash And Equivalents = $3,100,000
Summary From Only Ecommerce Investments
---------------------------------------
Est Cash & Equivalents: $3,100,000
Total Public Company: $ 450,000
IPOs - Only 2 - $8,352,000
Total = $11,982,000
Shares Outstanding = 11,340,000
Estimated Net Asset Value Per Share Before Sale = $1.06
Valuation Method for other companies = 5 Times NAV
5 * $1.06 = $5.28
NOW ADD ADDITIONAL CASH ( $6.5 Million ) and $2.5 Million from investment = $9.0 Million
*********************************************************
Total $11,982,000 + $9.0 Million = 20,980,000
$20,980,000 / 11,340,000 = $1.85 per share NAV
You are also overlooking that the 2.5 million investment does not come without a cost....most likely dilution to current shareholders...as they will be receiving additional preferred shares, thereby increasing the total number of shares outstanding.
So if they received 2 million (you can be sure they didnt pay market price)preferred shares for their investment...then the outstanding increases to 13.34 million/divided into 21 million NAV = $1.65 per share NAV.
Either way...current market price is significantly above these #'s.
Lets also not forget that TCG is not anywhere close to being a market leader in the incubator sector. They barely have the funds to even play in this field...and even then only with tiny .com startups (the fact that they invested in a .com that isnt even listed on nasdaq should raise some concerns). TCG has no room for error...and the internet startup game is by its nature a bit of a calculated gambling game. The appetite for IPO's cannot maintain its feverish pace over the long term.....and TCG is dependent on this appetite sustaining. At the end of '99...analysts said (from bloomberg article I believe) that the first warning signs for IPO market will be when you start to see some IPO's start to trade down from their offering price. Whether this analyst was correct or not..only time will tell.
$1.85 per share NAV is VERY generous imo...as this assumes that the IPO holdings do not lose any value over the lockup period. If I were a bettin man knowing what I know about most .com ipo performances in the year following their debut....I wouldn't bet in favor of price appreciation. (which certainly isnt to say that it wont happen...but its more more of a flip of the coin than a bankable expectation imo)
An investor in this field must not ignore ALL of the risks associated with an incubator business model: You are assuming that every investment is a successful one...this is not a practical expectation. Anyone familiar with the venture capital biz can testify that the internet startup landscape is littered with failed companies that were successful in the initial investment round(s)...but failed to ever make it to an IPO, and/or failed to make it as a viable business.
Lotsa landmines out there....just keep your eyes open. |
