Private Equity Valuation: How-To
By DONNA BOGATIN • Apr 29th, 2008 • Category: DEAL TRACKER
The Securities and Exchange Commission, NASD and the New York Stock Exchange permanently bar Henry Blodget from the Securities Industry for financial conduct unbecoming: The former Managing Director at Merrill Lynch, Pierece, Fenner & Smith, Incorporated and the senior research analyst and group head for the Internet sector at the firm, was censured, fined and barred for life, as of April 28, 2003:
Blodget’s conduct constituted violations of the federal securities laws and NASD and NYSE rules, which require that, among other things, published research reports have a reasonable basis, present a fair picture of the investment risks and benefits, and not make exaggerated or unwarranted claims.
THERE HE GOES AGAIN! The SAI 25
The first go around, the SEC alleged, and the NASD and NYSE found that, during 1999-2001, Blodget issued research reports on six Internet companies–InfoSpace, Inc., 24/7 Media, Inc., Lifeminders, Inc., Homestore.com, Inc., Excite@Home, and Internet Capital Group, Inc.–that were not based on principles of fair dealing and good faith and did not provide a sound basis for evaluating facts regarding those companies, contained exaggerated or unwarranted claims about those companies, and/or contained opinions for which there was no reasonable basis.
Five years into his permanent ban from Wall Street, Blodget nevertheless is giddily playing around with the NASDAQ index, this time frolicking with “the value of private companies,“ baiting holders of private company stock options:
With this handy tool, you can check your net worth every day, just like your friends at public companies.
Blodget has payed millions in mandatory restitution because the investing public had no basis for knowing the head of Merrill’s Internet analysis group was hailing “exaggerated, unwarranted claims.”
While Blodget has not repented, he has realized the error of his Wall Street ways and now makes his exaggerated, unwarranted claims with full disclosure that his “subjective” valuations are not even worth the price of a cup of coffee.
So what? So indicates the editor-in-chief of publicly traded CNET, Dan Farber:
Even if the SAI Index isn’t accurate…some fun for those who love tech company sports.
Contrary to the valuation gaming going on, however, the Internet economy continues to be poorly served by the man chastised by the SEC for his nefarious impact on the Internet economy.
Henry Blodget Tech Ticker puts Yahoo Finance at SEC risk, and all editorial publications endorsing the “analysis” of the NASD censured “analyst “engage in risky business as well: The IRS’ “safe harbor” valuation principles for illiquid stocks of startup corporations provide no safe harbor.
Want to know how to REALLY value private equity investments? Look to the PEIGG, not to Henry Blodget.
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I’m not sure anyone takes him seriously for investments (and I certainly hope that they don’t), but he’s right about one thing: Facebook is overvalued to the extreme. I’d trust a $9 billion valuation over a $150 billion valuation any day of the week.