Beer is Nice But It’s the Economy, um, Stupid?

James Carville, helping run Bill Clinton’s campaign for President in 1992, hung a now famous sign in the campaign headquarters that read, “It’s the economy, stupid.” It does remain Pres. Obama’s top domestic priority (healthcare sort of being part of that, I think), but he was sidetracked the last week by saying the Cambridge, MA police acted “stupidly” in an incident with a famous African American Harvard professor, although he admitted he didn’t know the facts when he said that. Kind of different uses of the word stupid which is a bit unfortunately ironic.

The President had a beer with the cop and the professor last night. How much press on this crazy thing? Arguments over what beer, why not American beer, why even suggest a beer, is that saying something about police, maybe he likes wine (actually the cop suggested beer). Did they sit at the wooden picnic table by the swing set, no they were at a nicer round table outside, what does that mean? And very little was accomplished (they “agreed to disagree” and talked about moving forward), except that maybe we can move off of this and yes, continue the discussion about race and the challenges that minorities still face in this country, but not over this issue. It appears, as the President said, that they might have both overreacted a bit. So let this one go, Rev. Sharpton please save your vitriol for other stuff. We should be learning, but not from this incident.

Now, let’s get back to the economy, which, by the way, is showing real signs of maybe, possibly, having almost kind of a little bit sorta hit bottom.

Online Ad Pricing Has Significantly Increased In 2009

PubMatic revealed that industry ad pricing levels have increased 35% since the start of 2009. Pricing for ad inventory sold through indirect channels such as ad networks and ad exchanges has steadily increased every month, gaining 47% since the end of January . The sustained growth is explained in a research brief which shows that online ad pricing may be on the path to recovery.

While 2008 experienced record lows in online ad pricing, 2009 has shown consecutive ad price growth for every month since the start of the year. PubMatic found that each month has had steady percentage growth over the previous month, ranging from 3% to as much as 15%. PubMatic will be publishing a more comprehensive report on this data at its Second Annual Ad Revenue 2009 Conference on October 8th in New York.

“Although ad pricing has not returned to year-ago levels, the industry has gone up consistently every month since January 2009. The worst may be behind us,” said Rajeev Goel, PubMatic Co-Founder and CEO. “There is more hope that Fall online ad spending may reach near-normal levels. This brings more urgency for our Ad Revenue 2009 Conference, where publishers can learn how to take advantage of new technology and a growing ecosystem to secure more share of ad spending.”

Ad Revenue 2009 will help large publishers capitalize on this upward ad price trend, outlining the concept of the 2^nd ad sales channel, a major contributor to the improving ad pricing now and in the coming years. With online advertising experiencing rejuvenation, PubMatic is hosting this event to bring together industry thought leaders that represent many segments of the ecosystem to discuss how publishers can better monetize their ad space. Topics for the conference will include:

• The Evolution of Media Buying and What That Means for Publishers
• The New Economics And Revenue Opportunities of Data
• How New Ad Units Are Impacting Publishers
• Leveraging Measurement and Analytics to Increase Ad Revenue
• The Blurring Lines of Ad Exchanges, Ad Marketplaces, and Ad Networks

Mrs. M. Sued for $45MM

Irving Pickard, the trustee appointed by U.S. Bankruptcy Court in New York to help victims of Bernie Madoff’s massive Ponzi scheme, has sued Bernie’s wife, Ruth, for $45 million. Previously he had taken almost everything she has, including their NY penthouse and everything in it, and gave her $2.5 million that he could not tie to the crimes.

But Pickard believes that she received fraudulent transfers that she is not entitled to even if she was unaware of her husband’s crimes, according to CNN Money. If a criminal gives you money you may have to return it even if you did not know it came from a criminal. This is why Pickard is suing a number of major Bernie investors who took money out of the scam through the years, to get the money back and distribute it to all the victims.

Separately, in a courthouse interview Bernie apparently said he doesn’t care what happens to his sons, since they have not spoken to him since he told them about the crime a day or so before his arrest.

Here’s what we keep waiting for. Who helped this guy? The “feeders” who found investors are already in trouble, but they did not work at Madoff Securities, talk to the clients regularly and prepare fully bogus statements of account. There had to be dozens of people in on this. When will we know about them? I’m sure we will, soon enough.

“Do We Need to Break?” “No, We’re Good.” Why I Love Satellite Radio

I love music. My Mom was a child prodigy on the piano who went to Julliard and chose Bryn Mawr over a concert career because she was burned out by age 17. She still plays now in her late 70s, doing concerts for her friends on her terms. She gave us all the love of music but alas the talent part did not pass to her only son (though my only son sure has it). So I was always the music kid, played records over and over, loved the radio (any other David Bowie fans out there?).

So I joined the radio station in college and rose to Program Director my senior year. The guy who ran it with me became my partner about two years later when we bought a real radio station in Florida at the ripe old age of 23, while I was still in law school (he went down to run it). We sold it about 5 years later with enough to give investors money back but not much else. Learned a lot but that’s another story! But I do know a bit about the industry.

As a listener, I really hate commercials. Twelve minutes each hour I don’t get music. When I got my first satellite radio I couldn’t believe it. All the different genres covered each in one station, and no commercials! Yes there are a few on the talk channels (hence the title above), but very few indeed. And I love the fact that the words we all say every day are allowed without censorship. And I love getting the TV news channels’ audio feed in my car. And now there’s even a portable device to take anywhere.

Yes I do own a tiny amount of Sirius XM stock but seriously tiny. The growing company has a lot of debt which it took on to do the satellites and so on.  Most analysts say hold the stock, so that’s what I’m doing. Will it replace “terrestrial” radio? No more so than cable TV replaced the broadcast channels. But cable continues to eat away at broadcast’s market share, and hopefully Sirius XM (and whatever other competitors come along) will bring down their debt, survive and prosper.

July Auto Sales up 10% From June

This month’s new vehicle sales (including fleet sales) are expected to be about 950,000 units, a 16.3 percent decrease from July 2008 but a 10.8 percent increase from June 2009, according to Edmunds.com.

Edmunds.com analysts predict this month’s Seasonally Adjusted Annualized Rate (SAAR) should be almost 10.5 million, this year’s highest by far.

“Value is the primary motivator for most sales today, so this summer’s inventory clearance is especially enticing,” observed Jesse Toprak, Executive Director of Industry Analysis for Edmunds.com. “Glimmers of hope about the economy and the buzz generated by the Cash for Clunkers program are also working in the auto industry’s favor.”

July 2009 had 26 selling days, the same as last July 2008. (The chart below sets forth other comparisons.)

		Change from July 2008			Change from June 2009 (Unadjusted for fewer selling days)
Chrysler (Chrysler, Dodge, Jeep)		-38.6	%		-11.6	%
Ford (Ford, Lincoln, Mercury, Volvo)		-4.2	%		0.5	%
GM (Buick, Cadillac, Chevrolet, GMC, Hummer, Pontiac, Saab, Saturn)		-19.5	%		7.6	%
Honda (Acura, Honda)		-13.8	%		22.0	%
Hyundai (Hyundai, Kia)		8.0	%		14.5	%
Nissan (Infiniti, Nissan)		-26.0	%		21.0	%
Toyota (Lexus, Scion, Toyota)		-15.4	%		26.9	%
Industry Total		-16.3	%		10.8	%

“Hyundai has become one of the most important companies to watch,” commented Michelle Krebs, Senior Editor of Edmunds’ AutoObserver.com. “To show improvement over last year is remarkable and promising, really, for the industry at large to see that it is possible.”

The combined monthly U.S. market share for Chrysler, Ford and General Motors (GM) domestic nameplates is estimated to be 42.3 percent in July 2009, down from 43.4 percent in July 2008 and down from 46.2 percent in June 2009.  Edmund’s has made the following predictions for the auto industry:

• Chrysler will sell 60,000 units in July 2009, down 38.6 percent compared to July 2008 and down 11.6 percent from June 2009. This would result in a new car market share of 6.3 percent for Chrysler in July 2009, down from 8.6 percent in July 2008 and down from 7.9 percent in June 2009.
• Ford will sell 154,000 units in July 2009, down 4.2 percent compared to July 2008 and up 0.5 percent from June 2009. This would result in a new car market share of 16.2 percent of new car sales in July 2009 for Ford, up from 14.2 percent in July 2008 and down from 17.9 percent in June 2009.
• GM will sell 188,000 units in July 2009, down 19.5 percent compared to July 2008 and up 7.6 percent from June 2009. GM’s market share is expected to be 19.8 percent of new vehicle sales in July 2009, down from 20.6 percent in July 2008 and down from 20.4 percent in June 2009.
• Honda will sell 123,000 units in July 2009, down 13.8 percent from July 2008 and up 22.0 percent from June 2009. Honda’s market share is expected to be 12.9 percent in July 2009, up from 12.5 percent in July 2008 and up from 11.7 percent in June 2009.
• Hyundai will sell 74,000 units in July 2009, up 8.0 percent from July 2008 and up 14.5 percent from June 2009. Hyundai’s market share is expected to be 7.8 percent in July 2009, up from 6.1 percent in July 2008 and up from 7.6 percent in June 2009.
• Nissan will sell 71,000 units in July 2009, down 26.0 percent from July 2008 and up 21.0 percent from June 2009. Nissan’s market share is expected to be 7.4 percent in July 2009, down from 8.4 percent in July 2008 and up from 6.8 percent in June 2009.
• Toyota will sell 167,000 units in July 2009, down 15.4 percent from July 2008 and up 26.9 percent from June 2009. Toyota’s market share is expected to be 17.6 percent in July 2009, up from 17.4 percent in July 2008 and up from 15.4 percent in June 2009.

Law Firm Marketing 101

In this tough environment, with major layoffs at most law firms, revenues and profits down, no major sign of things turning around, how does a law firm work hard to get new business? Well, through marketing of course. But do law firm partners really know what that means? Not sure if they get the stuff that I learned as a Marketing major at Wharton before law school. Here’s the thing. Until about 20 years ago lawyers could not advertise and “marketing” was considered taboo and unprofessional. Yet in reality lawyers did market. They did it by writing scholarly articles, being involved in bar association activities, community organizations and charities. Once the rules changed to enhance the ability to market, it took awhile but major law firms all have marketing staff, something unheard of just a few years ago.

Unfortunately, even though the marketing people are there, in many cases they are under-utilized. They create a nice website and nice brochure and accompany partners on speaking engagements. If you look at any 10 major law firms’ websites, in most cases you would not be able to tell them apart. This, gang, is not a marketing strategy. In business school they teach that marketing is the process of identifying an unmet need in the marketplace and designing products or services to satisfy that unmet need. Then you must distinguish yourself from your competitors in a manner that matters to clients and potential clients.

My little firm has a 5-page long and short term marketing strategy. Much of what I do in getting involved in conferences and so on flows from the strategy. The shorter-term strategy focuses on building the areas of practice for which we have become known. The longer-term focuses on broadening our reputation to other areas where we know we have strong capability but have not been as well known. In addition to practice areas, we focus on other unique aspects of our firm. We offer flat fees on transactional matters, which other firms are only now just starting to embrace. Clients love this. Also, we guarantee clients that we will return any phone call within four business hours. Not such a big deal, but it actually is to clients. Assuming you know what you’re doing and are a good lawyer, you still won’t get the business if you charge too much or are not accessible. There was an unmet need – focusing on these issues. Very few law firms boast of reasonable fees the way we do. And none that I am aware of guarantee the call back as we do. And it’s worked, not as a gimmick but as a strategy focusing on making the client happier.

So lawyers, do marketing the right way and you might get that extra market share in this sticky recession.

Global Online Population To Hit 2.2 Billion By 2013

The number of people online around the world will grow more than 45 percent to 2.2 billion users over the next five years, according to a new report by Forrester Research.  Asia remains the biggest global Internet growth engine: 43 percent of the world’s online population will reside in Asia by 2013, with 17 percent of the global online population in China. Growth rates in the US, Western Europe, and the major industrialized nations in Asia Pacific such as Australia, Japan, and South Korea will slow to between 1 percent and 3 percent.

“While per capita online spending is likely to remain highest in North America, Western Europe, and the developed markets of Asia throughout the next five years, the shifting online population and growing spending power among Asian consumers means that Asian markets will represent a far greater percentage of the total in 2013 than they do today,” said Forrester Research Senior Analyst Zia Daniell Wigder. “Multinational organizations must understand the dynamics of the shifting global online population to ensure that they are positioned to take advantage of emerging international opportunities.”

The Internet user base is increasing in every area of the world. Regional highlights include:

• North America. Online penetration in the US is set to rise from 73 percent to 82 percent over the next five years, representing about a 3 percent annual growth rate. By 2013, US online penetration will be on par with the most highly penetrated markets of Europe and Asia, such as the Netherlands, the UK, Japan, and South Korea.
• Europe. Europe’s Internet growth will be fueled by the continent’s emerging markets. Internet usage in Russia and Turkey will grow by almost 8 percent annually, while growth in Spain’s online population will increase by an average of more than 5 percent each year.
• Asia. China’s online population (already the largest in the world) will rise by nearly 11 percent each year over the next half decade. Other Asian countries with substantial online growth rates include India, Indonesia, Pakistan, and the Philippines. By contrast, growth rates in some of the more mature markets such as Japan and South Korea will rise by less than 2 percent each year.
• Latin America. Brazil is currently the fourth largest market in the world in terms of number of Internet users, but despite a 7 percent annual growth rate over the next five years, it will drop to the No. 5 position in 2010 when it is surpassed by India.
• Africa and the Middle East. The countries of the Middle East and Africa currently represent just 8 percent of the global online population but over the next five years will see some of the highest growth rates in the world, around 13 percent. Egypt, Iran, and Nigeria are among the countries with the highest growth rates in the region.

Countries With The Most Internet Users: 2008

1. US

2. China

3. Japan

4. Brazil

5. Germany

Countries With The Most Internet Users: 2013

1. China

2. US

3. India

4. Japan

5. Brazil

Going Public Without Raising Money?

Reprinted from our sister blog at www.reversemergerblog.com. Visit the site to see an introductory video on reverse mergers and a detailed FAQ.

Leading up to the market crash last year, on average 50% of reverse mergers included a contemporaneous financing, what some in the industry call an APO or alternative public offering. These days that number is much lower. Why do companies go public that are not raising money at the same time?

There are several types. The most common are companies that raised a round of financing just prior to going public from an investor that typically requires that the company go public as its very next step. This approach is good if you have an investor willing to do it. One thing to consider when you do, however, is that the investor typically will request a lower company valuation if they are investing in a company that is not public at the time they invest, even if they go public right after. The reason for this is that it is not certain that the company will complete its going public strategy. But for the company it provides certainty as to the availability of money, as sometimes investment banks and others promising to raise money upon completion of a reverse merger end up not being able to do so (though even then the company’s greatest risk is the expense of the reverse merger, as most companies would not go public unless the financing is completed). Several players have made a business out of providing this “bridge” financing prior to going public.

Other companies that do not raise money when going public are the types that are not really seeking growth capital. Some companies are seeking the other benefits of being public, whether it is to make acquisitions easier, to provide liquidity for investors and entrepreneurs, incentivizing executives with stock options, or seeking the additional public relations benefit of having a publicly trading stock. Some Chinese companies, for example, are very profitable and can finance even growing operations from earnings. But the owners have had no way to “cash out,” even if over time, and the public market provides that.

Last are companies that go public hoping to raise money either in the near future or somewhere down the road. Those seeking money a year or more later presumably have more than enough earnings to bear the costs of being public and to finance their operations. They have a business opportunity or other situation that will need cash later, and they believe (probably correctly) that having been public for awhile makes it easier to raise money a year later than if the company was just going public at that time. Others expect to raise money almost immediately after the reverse merger, believing that it is easier to raise money after being public than contemporaneous with the event. In both cases, the risk, of course, is that they are unable to raise capital for whatever reason when they are ready. In fairness, in a number of situations I have seen companies go public and then raise money as quickly as 4-6 weeks later.

In general I advise companies to try to complete their financing at the time of the reverse merger if possible and if they are able, especially if that is the primary reason for their going public. We also protect the downside where possible by ensuring that the company has no more than 300 shareholders of record (this means people with a physical stock certificate rather than owning stock electronically in an Ameritrade or similar account). If we do that, and the company is unable to raise money and wants to stop being public, a board consent and simple one page filing with the SEC will “de-register” the company’s stock and it will no longer be subject to the SEC reporting requirements. Technically, a market maker could still make a market in the company’s stock on the Pink Sheets in this circumstance, but no more SEC filings or financial statement audits will be required.

So: if you need to raise money down the road, or have many other reasons for being public, then going public without a contemporaneous financing usually makes sense. If you are raising money immediately after, just make sure it is essential to your source of financing that you wait until after you are public to raise the money, and do your best to stay under 300 shareholders of record. In that case, the risk is not substantial. Good luck!

Get Ready for the New Edition of the Book…

Reprinted from our sister blog at www.reversemergerblog.com.

Everything is a go for the 2nd edition of Reverse Mergers, the book I originally wrote in 2006, which was published by Bloomberg Press and which was translated into Chinese about a year later (and which inspired this blog which started in late 2006). I have just about finalized the edits and the plan is for a December 2009 release (great stocking stuffer!). What’s new? Well, I’ll get into a bit more of a sales mode as we get closer, but here are some advance tips:

• A full chapter on China which was not in the first edition.
• An update on all the changes to Rule 144 enacted last year which changed things rather dramatically.
• A detailed review of WestPark Capital’s innovative WRASP structure to go public from a Form 10 shell directly to trading on the NYSE Amex.
• An update on all the changes approved last year to SEC forms and disclosure requirements.
• A significant update on SPACs and what the future might portend.
• More about Form 10 shells and self-filings as viable alternatives.
• A brand new last chapter including thoughts from a number of leading industry players identifying today’s important trends and where they might be headed.

I hope all of you who were so supportive in the publication of the first edition will see the benefit of acquiring this updated edition as the markets begin to thaw and the deal markets start to improve. I’ll bug you all again later this year!

Second Quarter Reverse Mergers Not Great, But Experts Hopeful

Reprinted from our sister blog at www.reversemergerblog.com.

The Reverse Merger Report, in its July issue, noted that the number of reverse mergers continued to slide in the second quarter of 2009, with just 37 deals getting completed. This is a reduction of 12% from the first quarter and 30% from the second quarter of last year. Interestingly, in the quarter the IPO market has improved. While some think this means more competition for reverse mergers, my experience has been that during up markets and strong IPO activity, reverse mergers also remain strong for companies seeking to go public even faster than with a traditional IPO.

Experts quoted in the article point to China as the place that will help the RM business come out of the doldrums. I agree. Things are really bubbling over there and we hope there will be more and more activity from the PRC. Based solely on my firm, those experts could well be most right. And hey, 37 deals is still not that bad. But the financing market also stayed very weak, and that is a bigger problem. PIPE guys, please join China as the Calgon-equivalent of this RM downturn…..

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