Archive for the ‘Finance’ Category.

Gruniad accounting #fail

Given that the Gruniad’s parent company has demonstrated in previous years how to make themselves as tax efficient s possible, it might be expected by now that some of their skill in reading a balance sheet might have passed down to the reporters of said organ.

It seems though that such knowledge transfer isn’t taking place if today’s attempt to do a hatchet job on Lycamobile is anything to go by.

So, what has Lycamobile done to deserve the hairdryer treatment?

A mobile phone company that has paid no corporation tax for three years has become the Conservatives’ most generous corporate donor after giving more than £300,000 over the last nine months, new figures show.

The latest available figures show the company did not pay any tax between 2008 and 2010, despite generating a turnover of between £47m and £88m.

Now those with half a brain cell will already be screaming that turnover isn’t profit and you’d be correct – but the Gruniad article is written to fulfil an agenda and nowhere in the piece is the actual profit/loss mentioned.

So what are the relevant figures* (2011 numbers were not available)?

Year Turnover (£m) Profit (£m)
2009 47.90 -10.91
2010 88.04 -6.86

And now we know why Lycamobile paid no corporation tax in 2010 and 2011.

*I’d link to my source but a) it is my employer and b) it is behind an expensive paywall so you’ll have to take my word for it or go googling.

As the disclaimer says…

…the value of your investment may go down as well as up.

At Royal Bank of Scotland’s AGM on May 30th, the chairman Sir Philip Hampton told investors:

I don’t believe that shareholders’ wealth is likely to be restored any time in my lifetime or some lifetimes beyond.

Which is surely the point? They invested in a bank whose management made some appalling judgement calls, didn’t keep a close enough eye on what the board where up to and saw the value of their investments destroyed.

Last time I checked we called that capitalism. The only reason that RBS shares have some negligible value left is that the previous government interfered with the natural process and kept the bank afloat with money stolen from the tax-payer.

No, I wasn’t an RBS shareholder until the government of the day decided to make me one. The only shares I own in the financial sector are in fellow bank Barclays (BARC) and the overwhelming majority of those are as a result of BARC’s takeover of Woolwich many moons back. My Woolwich shares came about because I was a saver with them at the time they floated. Thus my stake in BARC is almost pure profit.

Falling flat on your Face(Book)

As anyone who has not been spent the last couple of months living off the grid will be aware, social networking giant Facebook (NASDAQ:FB), the brainchild of the hoodie-wearing, university-dropout Mark Zuckerberg, has gone public.

Before it kicked off its Initial Public Offering (IPO) roadshow, FB indicated it would be selling 337.4m shares (12.3% of the company) at somewhere between $28 – $35 a share, valuing the company at $96bn if it achieved the top end of the range.

Subsequently the company raised it’s target price range to $34 – $38 a share, which would value the company at just over $104bn.

Then, on Thursday, once the IPO had closed FB confirmed the final details of its listing: 421,233,615 shares at $38 a pop, raising $16bn and confirming an initial market capitalisation of approx. $104bn.

Given that in 2011, FB made $1bn profit on a revenue of $3.7bn that means it started off trading at over 28 times earnings. Apple at its peak share price of $644 was only trading at 5 1/2 times its eventual 2011 earnings and is now down to about 4.6x. Google is currently valued at just over 5x, Microsoft 3.5x, Intel 2.4x, Amazon 2x…

Facebook makes most of its money through advertising. It is thus concerning that their click through rates are below average. You can add to this their admitted problems with trying to making money on mobile traffic.

Yet, even given what – to me – looked like a company which has been horrendously overvalued, investors and analysts were expecting a first day ‘pop’ with, at the wilder end, estimates of 50% being made.

What they got instead was a fizzle with the shares closing up a paltry $0.23 (0.61%) – having opened at $42.05 (10.6%) and briefly touched $45 (18.4%) – and it seems that the only reason they didn’t close down was that the banks who underwrote the IPO took up their option to buy an additional 63,185,042 shares.

If I’d been silly enough to buy Facebook shares I’d be looking to cut my losses ASAP.

For comparison, here are the IPO and first day close details of some other internet companies:

Company Date Shares Float Price ($) Approx. Mkt Cap ($m) Close Price ($) % rise
Amazon (NASDAQ:AMZN) 1997-05-15 3,000,000 18 438 23.4 30
Google (NASDAQ:GOOG) 2004-08-24 19,605,052 85 23,000 100.34 18
Groupon (NASDAQ:GRPN) 2011-11-03 35,000,000 20 12,700 26.11 30.6
LinkedIn (NYSE:LNKD) 2011-05-19 7,840,000 45 4,410 94.25 109.4
Zynga (NASDAQ:ZNGA) 2011-12-16 100,000,000 10 7,000 9.50 -5

Still, I doubt Zuckerberg will be too worried. Even after selling 30.2m shares in order to satisfy the IRS, his net worth weighs in at approx. $19bn.

Given that then you’d have thought he’d have been able to hire himself a nice suit for his wedding…

Mark Zuckerberg with wife Priscilla Chan