Constant Contact - what happened?

Constant contact has filed for a secondary offering following its IPO last year- but that is not good news.

image Constant contact is a provider of direct marketing e-mail software. We were a bit surprised when the company filed for its IPO in July of last year. The very first day the company’s stock rose to over $30 a share, well above the initial pricing of $16 per share, putting its market cap at $200 million with 67 million shares sold. This was one of the hot tech IPOs to watch in 2007. Since then the stock has fallen to $14 per share.

Recently Constant Contact registered to sell 4.2 million shares from current stockholders.  Ironically, the stock is being sold to pay the expenses for the offering! 658,620 additional shares are expected to be floated this time around. It appears that insiders are selling after the expiration of the lock-up period.

So what happened to Constant Contact? Back in February of this year Kris Tuttle of Seeking Alpha had predicted that  after the end of the lockup period, prices would come down to a more realistic $10 to $12 per share. Some of the reasons he had were:

1.The  earning expectations for the company are much higher than would be expected of a SAAS company.

2. Customer acquisition costs are pretty high.

3. The e-mail marketing game is very crowded an expectation of 40 month customer lifetime is not realistic

4. The expectation of return on invested capital is low.

Looks like that prediction was on the money!



The Forbes billions

And so are we in a recession?  You wouldn’t know it from the latest Forbes billionaires list which now boasts of 1,125 members, breaking four digits for the first time.

imageBill Gates is down at number three, giving up the number one spot to his good buddy Warren Buffett , at $62 billion - with a 6x surge in net worth since last year, thanks to flying shares of Berkshire Hathaway. The number two spot now belongs to Carlos Slim Helu of the Mexican wireless telephone company, America Movil.

Interestingly, the Ambani family of the Indian company the Reliance group might have come in first on the richest list with a combined worth of $85 billion, except that the warring Ambani brothers Mukesh and Anil split up their fortune and showed up in fifth and sixth positions respectively, with individual net worths of $43B and $42B.

And how about the youngest self made billionaire? Yes, you guessed it - it is 23 year old Facebook genius Mark Zukerberg who is worth $1.5 billion. Of course this number is based upon Microsoft paying $240 million last October for  a 1.6% stake in the company, which pegged Facebook’s value at a whopping 15 billion. Not many believe this huge valuation, and the story going around is that Microsoft paid up not necessarily because it believes that the company is worth as much, but more to keep out those who might be thinking about taking over all of Facebook!

While on unnamed suitors for Facebook, Google founders Larry Page and Sergei Brin made the top of the Forbes thirtysomething list with $19 billion apiece.

 

 

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Amazon’s new twist on the order fulfillment business

Amazon continues to amaze as it innovates on taking products, services and processes that have already made it good money, and throws it out in the marketplace for other businesses and entrepreneurs to use.

The latest in its cache of outsourced products and services is a new API that is designed for its "Fulfillment by Amazon" pack and ship service that was introduced in 2006.

This is how it works.  A business physically ships its inventory to Amazon to store.  When a product is sold, the seller notifies Amazon where the product gets packaged and shipped to the customer.  This is clearly a win-win strategy.  The small-business owner outsources his warehousing and shipping (and some cost, of course) while Amazon gets a client into their ecosystem where they can cross sell everything from pay-per-click advertising to its storefront related services.

Fulfillment by Amazon API allows businesses to automate the order processing through Amazon

According to Amazon handling fees start at $0.50 per item plus $0.40 per pound with a storage fee of $0.45 per cubic feet per month and saves sellers the time and money needed to store, pick, pack, ship and provide customer service for the products sold online.

The new Fulfillment by Amazon API allows businesses to automate the order processing through Amazon. Order labeling, shipping and tracking and can now be followed with minimal  human intervention.



What’s happening to all that money?

There have been many accounts recently about the implosion and explosion of the private equity, venture capital and hedge fund markets.

image Given that there are few high-profile hedge funds and private equity funds that have imploded in a big way -including a few of those which were playing in mortgage backed securities.  Many are viewing this as a necessary correction, and just desserts for funds that are not playing by the rules (wasn’t the whole idea behind hedge funds to be "hedged" in down markets?). But there are a large number of hedge funds that have not only survived the downturn of the market in the last quarter, but have generated positive returns.

By and large the amount of capital in the market is growing, but the distribution of the money is the big open question.

Venture capitalists raised 34.7 billion in funds in 2007, the highest amount raised since 2001 which was 38.8 billion according to Thomson financial and the National Venture Capital Association (NVCA).

So is all of that money going?  As of last year, not a whole lot found its way into the pockets of entrepreneurs!

According to the Los Angeles Times, the VC investment into local companies fell to $689 million in the fourth quarter of 2007 compared to the $921 million during the same period in 2006. However the number of deals actually went up indicating that investors might be making smaller bets and waiting for the market to shakeout.

The New York Post (Private Equity Is Exploding) reports that the private equity boom in 2006 - 2007 is continuing through the early part of 2008.  Despite a few spectacular flameouts, PE firms are continuing to raise tens of billions of dollars.  Even with pension funds scaling back their investments, money has continued to flow in from foreign wealth funds.

image For now much of the money in alternative investment funds seems to be sitting in the sidelines waiting out the crazy market dance.

As the gurus of Wall Street would say — "staying in cash is a perfectly acceptable market strategy".  So the current wait-and-see-attitude where funds are not deploying all of their capital, might simply be a legitimate defensive position, and not the doom and gloom scenario that it is  sometimes made out to be.



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