Information Ring – August Back to School Edition

Dear folks,
Thank you so much for the positive comments I have received on the previous emails. Because of the positive feedback I decided to make it better to keep the momentum going. I invite you to read the new edition on my blog at brianlangis.wordpress.com There is more contents, the display is better, more visuals, files, comments and I also post occasionally. Enjoy reading about Zynga, Romney vs Obama, Manchester-United, Usain Bolt, RIM, Glass-Steagall, a couple videos, a hot police chase and more.

Also free to check out emergingfrontiersblog.com
Me and colleagues are tracking down frontier market news at Leopard Capital’s frontier market blog emergingfrontiersblog.com

Twitter: #absolut_brian
Linkedin: http://www.linkedin.com/in/brianlangis

Enjoy!

Zynga a Speculative Value Play?
ZNGA is trading for about $3 with a market cap of 3.9b. This is far from the $10 IPO. The stock has been getting slaughtered because of slower growth forecast. The investment thesis: With about $1.5b in cash or $2 per share, you are buying Zynga on the cheap, almost entirely for its cash. They also own their $233m office in San Francisco. This is the kind of valuation you see in companies in distressed situations but Zynga isn’t burning any cash and that’s important. With only $100m in debt and a current ratio of 2.24x (It means that they can pay their bills for a while) you might be in for a safe bet. The risks: A Facebook crash, shitty games, terrible management, or they start blowing the cash on shitty acquisition. So tell your friends to load up their credit card with virtual potatoes.

The next 10 Russian Elections
Merdvedev mentioned he might run for President again. He will be 58 in 2024 assuming Putin serves two 6 year terms.
1994: Putin
2006: Medvedev
2012: Putin
2024: Medvedev
2030: Putin
2042: Medvedev (He will be 76)

The Other Three Letter Company
Now it is IBM that’s interested to buy the pieces left of RIM. IBM is attracted to their enterprise-service unit, the division which operates a network of secure servers used to support Blackberry devices. A Berenberg Bank analysts said the unit may be valued at between $1.5b and $2.5b depending on the mix of asset included. The current market cap is around $4b at the moment.

Also for sale: RIM’s corporate jet, a nine-passenger Dassault Aviation SA F50EX up for US$6 million to US$7 million.

More on RIM
CEO Thorsten Heins on a CBC interview: “there’s nothing wrong with the company as it exists right now… This company is not ignoring the world out there, nor is it in a death spiral… and he is confident the company will be a “very strong player” in smartphones for years to come.

There’s nothing wrong with the company…..
The stock lost over 90% of its value since its peak. The latest round of firing will eliminate over a third of the workforce. They fired so many engineers as result they can’t release a phone on time. Will the phone be any competitive with what’s out there? They use to have 50% of the smartphone market, now they have dust bites. They released a tablet without their marquee email service and it was a total flop. The company announced an operating loss in excess of $500 million last quarter. Imagine if there was something wrong with the company.

RIM also released a new version of its tablet, the PlayBook for $549. Terrible pricing for something that’s not an Ipad 3. Top end pricing for not a top end product. For $200-$250 you can have a Kindle or a Nexus that has a similar or superior hardware and apps.

RIMM: $8.20, Prem Watsa, CEO of Fairfax and on the board of RIM, is loading up on the stock and now owns 10% of the company. What does he know we don’t? A potential sale?

Phone War
Potential new comers: Microsoft, Amazon, and Facebook are all working on a potential smartphone. Microsoft already have a smartphone in partnership with Nokia. Now they are looking to release one where they are in control of the hardware. I’m not sure where a smartphone fix in Amazon product mix and Facebook wants to release one in 2013. The goal of these companies is to create an eco system where they are in total control of the user experience.

Facebook
Facebook is still disappointing their investors. Their first quarterly report met expectations but projected slower growth. You can buy it for around $21.60, way below the $38 IPO. In my last newsletter my back of napkin valuation had FB price at $16 using a 20X PE.

About Face on Glass-Steagall
Sandy Weill, the ex-CEO the Citigroup, did a solid about face for the reinstatement of Glass-Steagall Act. This turned a lot of heads because Sandy was the one that spearheaded the change in legislation with the merger of Citi and Traverlers Group in 1998. Glass-Steagall is the measure that separated commercial banking from investment banking and insurance that became law during the Great Depression.

Sandy declared during an interview on CNBC:
“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans, have banks do something that’s not going to risk taxpayer dollars, that’s not too big to fail,”

The repeal of Glass-Steagall is widely blamed for the financial crisis and the creation of monster financial institutions. Others counter argue that Bear Sterns, AIG, Lehman Brothers, Fannie Mae and Freddy Mac required billions in taxpayer bail out money and none were affected by repeal of the act.

Since the merger Citi shares are down about 90%.

Romney vs. Obama
The Republican money raising machine is turning on all cylinders. The Republicans raised more money than its Democrat counterpart in the first quarter of 2012 and in the last three months. Obama has a slight lead in the polls and leading in the main battleground states. News Corp’s Ruport Murdoch ripped Mr. Romney’s campaign team and suggested that he needs to surround himself with better people if he wants to win. (He also ripped scientology Romney foreign trip also didn’t go well. He tumble in England and seem get mixed up in Jerusalem. But I don’t think an American in Kansas gives a damn about what Romney thinks of Jerusalem. Rumors are spreading that he didn’t pay any taxes in the last ten years which makes it the main reason for not releasing his income tax filings before 2010.

The race is still long and two big events might change the momentum of the race. Romney just named Tea Party favority Paul Ryan (Don’t confuse with Jack Ryan) has his VP running mate. That’s a very safe pick that will make the conservative base happy and he’s the polar opposite of Barrack Obama. Other than the business experience, when Romney was Governor of Massachusetts he ran a platform very similar to Obama on healthcare, gun control, pro-life, and the environment…there is also the Republican convention left.

Money Raised
Obama: 300m
Romney: 153m

Spent
Obama: 204m
Romney: 131m
*Source: Opensecrets.org

Historically, the candidate that raised the most money won.

Twitter Follower
Obama: 18,000,000
Romney: 800,000

@Robdelaney “@MittRomney I don’t care about gays marrying but they shouldn’t be allowed on straight planes because then I have to breathe gay air?”

Manchester United
Ever dreamed to own a professional sport? Well what about owning a piece of the world’s most prestigious franchise? According to Bloomberg Manchester United said to price 16.8m shares at $14 each in the U.S. The original plans for a bigger $1b Singapore IPO was scrapped. The money raised will be used to pay down debt. If you have a lot of money you can buy the 10% being offered.

Symbol: MANU
Price: $14

Here is what you are buying:
– A Record 19 National Championship
– Wayne Rooney and Welshman Ryan Giggs
– A strong global brand
– Strong merchandise sales
– A lot of sponsorship revenues and product licensing which is accountable for a third of the revenues.
– 659 million followers
– Revenue for the year ended June 30 was 315 million pounds to 320 million pounds

The club is controlled by the Glazer family which acquired the club for $790m in 2005. The IPO would would valued the team to $2.5b to $3b. The Glazers also own the Tampa Bay Buccaneers (The other football)

Source: IPO filings and Bloomberg

World’s Oldest Shipping Company Closes
Name: Stephenson Clarke Shipping Ltd.
Open: 1730
Close: August 2012
Why: They sold their last vessel. Since the financial crisis it is a terrible industry to be in. The Baltic Dry Index, a gauge of rates to transport dry is down 55 percent this year and on course for a fourth annual slide in five years.

A UFO on Mars
A UFO sighing has been reported on Mars. Curiosity landed on Mars successfully and is on a two year mission to find out if Mars has the ingredient necessary for life.

Hotmail Generation X
The good old boring email war is getting a brand new contestant: Outlook.com
This is Microsoft major push before the release of Windows 8. Outlook.com is set to replace Hotmail.com in the future with this cloud base email. Instead of everything being stored in one computer, they will be stored on Microsoft’s servers. This is part of Microsoft strategy to use Outlook.com for all its email offering. It looks elegant and user friendly.

Numbers
40%: Portion of U.S. corn output used to make ethanol
955m FB subscriber
Google+ 200m+
Gmail users: 425m
Outlook.com 1m users within hours of launching. Goal: 1 billion

Meet the Dell
You can now meet Micheal Dell and his family by following his daughter Alexa’s Twitter account. She is very hyper active on social media and tells you the very detail of her schedule including when and where she will meet her parents. I’m sure Micheal is impress because he is paying $2.7m a year for security protection of his family. (Update: Alexa account has been shutdown)

For Inspiring Entrepreneurs and Self-Helpers
I just found the Foundation video series on Youtube by Kevin Rose.
Here is a superb interview with Timothy Ferris, the author of the famous The 4 Hour Work-Week and The 4-Hour Body.

From the same series check this video with Jack Dorsey, co-founder of Twitter and CEO Square. If you are an entrepreneur or inspiring to be then you have to watch this video. I like his clear well spoken useful advices. A change from the typical “work hard and don’t give up stuff”. I particularly like this interview because I feel like I’m having a conversation with the guy.

Hotcorn
The drought in the U.S. is causing the food prices to go up up up. Corn is at record high. That’s not just a U.S. problem but a worldwide one because the U.S. exports a lot of food. Also corn is used to make fuel and to feed live stocks. Higher food price => higher live stock production cost => pass on cost to consumer. So expect a bigger grocery bill and a potential worldwide food shortage.

Twitter Business Case Study
All success stories. Here is an interesting link about how companies use Twitter to increase business results. The study is provides concrete numbers and facts on well knows companies. It’s one of the first micro studies that I have seen that measures the impact of social media on your business. Yes the study is hosted by Twitter so they might have weed out the bad ones but the data are independently provided by the companies mentioned. Nice find by Hugh Langis, the world’s artist. Hughlangis.com

Bolt to the Finish
The men’s 100m race, my favorite Olympic event. I wait 4 years to watch 9.6 seconds of racing. By the time I finish this sentence Usain Bolt probably got another gold medal. At the moment of this writing Bolt is the first man to hold both the 100m and 200m world record.

World Class Act: Outside link to Usain Bolt stopping an interview for the American National Anthem
Usain Bolt World Class Act

Jersey Named Best International Financial Centre
Not the state, the island. This is their third consecutive win. It’s not part of the UK or the EU.

The Coolest Police Chase Ever
Here is a massive truck dodging cops and bullets.

Bad Ass Pics

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