While institutional investors remain infatuated with shorter-term measures they remain vulnerable to manipulation but success by corporate venturing groups into timing exits could provide an interesting example to help create a solution for others to follow.
There is a general wringing of hands over some struggling post-flotation share prices in the social media sector among US companies that has sparked a debate about how and when to sell shares.
The options are on a private market or secondary sale/later-stage round before listing, at the initial public offering or after a lock-up/period of time but there is generally few venture capital firms with enough portfolio companies and flotations to be able to devise more efficient strategies about what to sell, when, and where.
So chip maker Intel’s 1,000-strong portfolio offers an interesting glimpse into the Brownian motion of portfolio management and its global reach means it has had enough IPOs every year to indicate where markets are hot, where they are not and other issues (need to reap cash for Treasury among other issues).
Intel’s latest regulatory filing on the matter (click here for a glimpse into tomorrow’s story) shows a company prepared to support some of its investments on public markets into the longer-term, such as Clearwire, even if financially the returns have not been great, while selling down others, such as VMware and Pacific Biosciences.
Other groups, such as South Africa-based media group Naspers, use public markets as another funding round and has not sold any shares in China’s Tencent as it looks to reap returns through dividends in the longer-term – a spectacular success so far. Others, such as software provider Microsoft with its social network Facebook investment, hold on to align interests for strategic purposes – see Fortune’s news report on Facebook post-lock-up)
The challenge, as ever, is finding the few metrics that are significant, including what the innovation capacity of a company is and so its likely future earnings capacity – something which a corporate venturing unit can help indicate.
While institutional investors remain infatuated with shorter-term measures they remain vulnerable to manipulation – see a nice article by John Plender on this topic – but success by corporate venturing groups into timing exits could provide an interesting example to help create a solution for others to follow.
