Really liked Ian Spence's thoughtful piece on the dynamics in the London public markets for UK software companies - you can find the full article here - http://tinyurl.com/cfxqj2c. Ian also referred to frustration (via Neil Rimer's blog) that the UK has not spawned signature IPO's matching the fizz of FB, Zynga, Linkedin, Groupon etc
One of the issues has certainly been that the capital released from the many "take privates" over the years has not been recycled by the City institutions into new IPO's and at best has been invested in the ever decreasing number of surviving companies.
Don't know if anyone has researched this yet, but it would be interesting to know what has happened to those PE backed companies within the UK tech sector that have then been re-financed or sold to strategics? What has become of that money and has it, on the whole, generated new wealth.
Bear in mind that there are probably more tech-minded PE firms in the UK than there are out and out VC funds. In the US and in Israel, it is the opposite, and whilst there is growth in the non-venture private tech strategies in both of these markets, they are both still dominated by the supply of venture for new businesses. The is the life-blood of new innovation, and certainly when you want to see ultra-ambitious and "global-domination" ambition.
A second issue has been that historically most of the public "software" companies in the UK are really IT services companies with differing levels of IP. By their nature, they have tended to be domestic and very few real IP-driven global businesses have been created or backed by the City.
The TechMARK itself is a hotch potch of engineering, telco, and IT services companies with a smattering of hardware thrown in. (Very few obvious exceptions like Autonomy (now HP of course), ARM, CSR and maybe Sage, which is global, although not a traditional global software company in the US sense of the word).
Finally, It is completely unrealistic to build an expectation that London can compete fairly with the US when you look at the make-up, size and global reach of the companies on both sides of the pond (Apple, Microsoft, Oracle, Cisco, EMC etc vs Sage, Logica, Misys etc is just not a fair fight!), and hence why Ian's piece was thoughtful. It takes into account the risk appetite of the UK ecosystem and its long term affect on the type of companies that have and will be built and funded all the way through to being public.
Without a see-change (business culture, incentives, passion, risk appetite etc) this is the way it will continue to be, and in a macro environment that places a premium on cash-flow and visibility and a discount on future growth it will be even more sharply felt.
In Israel (where I am based) there is a much more mature strategic M&A market for tech companies and whilst some of this money recycles back out of Israel to the foreign VC's and institutions that have given their previous backing, much of the money is recycled into creating the next generation of start-ups.
The big question for the UK is whether they have the critical mass across the value chain to create this type of self-supporting ecosystem, and if not, what intervention is required to assist this in happening! (Your thoughts on a post card!)
Showing posts with label US. Show all posts
Showing posts with label US. Show all posts
Tuesday, May 29, 2012
Monday, May 30, 2011
Foreign holdings of US Treasuries declines by 2nd largest amount EVER
The US balance sheet hit a new record last week, a mere $2.779 trillion. Most worryingly is that the Treasury securities held in custodial accounts at the Fed, which is considered to be the best representation of real time foreign holdings of US treasuries, fell by the largest amount in 4 years, the 2nd largest decline in history. It was topped only by the decline of the week ending 15th August 2007, which is when the world was ending!
-------------------------------------------------------------------------------------------------LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!!
-------------------------------------------------------------------------------------------------LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!!
Friday, May 27, 2011
US to default?
With the world and their Mother watching the European sovereign debt drama unfold with abated breath, the not insignificant risk posed by a U.S. sovereign debt crisis increases by the day. The risk of a US default continues to rise which can be seen in the sharply increased cost to insure U.S. sovereign debt. Risk of a U.S. default can be seen in the credit default swap (CDS) market. 1 year U.S. CDS has risen from 23 to 37 or by 60% in the last six trading days (see chart).
The orange line is the US CDS premia, yellow is Japan and pink is the UK.
In the more liquid 5 year U.S. CDS, the cost to insure has risen by some 50% in the last week. Whereas there is normally minimal trade in the US CDS market, the norm is a handful of trades (sometimes as low as one), last week saw investors placing 135 trades in U.S. CDS’s. Just to compare, there were 360 CDS trades on Spain's sovereign debt, 191 on Greece, 142 on Portugal and 136 on Italy. A US default would not be “catastrophic” it would likely lead to a very sharp fall in the U.S. dollar, (especially versus the hard currency, collateral and monetary asset that is gold), sharp fall in U.S. bonds and sharply higher interest rates. This has the potential to create another systemic crisis involving sovereign nations and banks globally and could lead to a deep recession. Indeed, it would not be unfathomable to suggest that the S&P “warning” of US debt was a mere warning precisely because it was the US in question. Anyone else would have resulted in a downgrade of 3 notches at least!-----------------------------------------------------------------------------------------------------------------
LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!!
The orange line is the US CDS premia, yellow is Japan and pink is the UK.
In the more liquid 5 year U.S. CDS, the cost to insure has risen by some 50% in the last week. Whereas there is normally minimal trade in the US CDS market, the norm is a handful of trades (sometimes as low as one), last week saw investors placing 135 trades in U.S. CDS’s. Just to compare, there were 360 CDS trades on Spain's sovereign debt, 191 on Greece, 142 on Portugal and 136 on Italy. A US default would not be “catastrophic” it would likely lead to a very sharp fall in the U.S. dollar, (especially versus the hard currency, collateral and monetary asset that is gold), sharp fall in U.S. bonds and sharply higher interest rates. This has the potential to create another systemic crisis involving sovereign nations and banks globally and could lead to a deep recession. Indeed, it would not be unfathomable to suggest that the S&P “warning” of US debt was a mere warning precisely because it was the US in question. Anyone else would have resulted in a downgrade of 3 notches at least!-----------------------------------------------------------------------------------------------------------------
LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!!
US GDP revision & implications for growth
The US GDP non-revision for Q1 of 1.8% (expectations of a rise to 2.1%) would not mean anything if you merely read the headline. However, an investigation of the composition reveals a slower trajectory growth.
· Surprising Downward Revision to PCE, Points to Weaker Aggregate Demand- the most disappointing revision was the PCE, which was revised down from 2.7% to 2.2%. The revision was spread across the board- durables, non durables and services. Consumption spending is a core component of GDP, and the consumer is seemingly EVEN weaker than thought.
· Upward Revision to Inventories Points to Lower Inventory Building Ahead:- the stronger inventory build is likely at the expense of coming quarters, in particular Q2.
· Net GDP Revision Points to a Slower Trajectory of Growth than Apparent Earlier
The Fed’s current 2011 growth forecast of 3.1%- 3.3% will undoubtedly be forecasted down at some stage – not only was Q1 GDP growth NOT revised up as expected, the composition indicates that Q2 will be weaker than anticipated.
-----------------------------------------------------------------------------------------------------------------
LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!
· Surprising Downward Revision to PCE, Points to Weaker Aggregate Demand- the most disappointing revision was the PCE, which was revised down from 2.7% to 2.2%. The revision was spread across the board- durables, non durables and services. Consumption spending is a core component of GDP, and the consumer is seemingly EVEN weaker than thought.
· Upward Revision to Inventories Points to Lower Inventory Building Ahead:- the stronger inventory build is likely at the expense of coming quarters, in particular Q2.
· Net GDP Revision Points to a Slower Trajectory of Growth than Apparent Earlier
The Fed’s current 2011 growth forecast of 3.1%- 3.3% will undoubtedly be forecasted down at some stage – not only was Q1 GDP growth NOT revised up as expected, the composition indicates that Q2 will be weaker than anticipated.
-----------------------------------------------------------------------------------------------------------------
LEGAL DISCLAIMER: The views mentioned above are purely that of the author, and does not necessarily reflect the official view of Goldrock Capital or employees. Unless of course the aforementioned view was a phenomenally good call, with exquisite market timing, in which case Goldrock Capital reserves the right to all credit!!!!
Subscribe to:
Posts (Atom)