What are good books to help me invest in value plays?
The first book I would read (and, if you have already read the book, it is
probably worth reading again) is One Up on Wall Street, by Peter
Lynch. Lynch was the famed money manager of the mega Fidelity Fund.
Basically, he provides easy-to-understand analytical tools to make money
from undervalued companies. Also, he recently wrote a revision to the book
that – interestingly enough – talks about Internet stocks.
Next, take a look at The Vulture Investors (revised edition), written
by Hilary Rosenberg. This is a fun read. Basically, you get a history of
the legendary vulture investors, such as Michael Price, Carl Icahn and Sam
Zell.
It is also critical that you have a firm understanding of balance sheets,
income statements and cash flow statements. A good book on the subject is
Understanding Balance Sheets, written by Thomas Friedlob and Franklin
Plewa. The book is clear and concise and covers everything you need to
know, such as cash, inventory, long-term debt, payables, receivables and so
on.
How do I find out about public companies that get private financing, such
as through PIPEs, equity lines and convertibles?
At internet.com, we have a newsletter called VC Buzz, written by Mary Evelyn
Arnold. It’s a daily run-down on the latest deals in the VC world. It is
a great way to see what the “smart money” is doing. And yes, you’ll see
PIPEs, equity lines and convertibles. To get more info on VC buzz, click
here.
Do you plan to write any more articles on rollup opportunities?
Absolutely. I intend to write a piece at least every month surveying the
latest deals and seeing which ones look promising. Also, next week I will
write an article on reverse mergers, which I predict will become a much more
common form of financing for high-tech companies.
I got the following note, which clarifies the parameters of PIPEs:
Just a note regarding PIPEs, that I believe you may not have gotten totally
right. In most PIPE transactions the selling company gets the money upon
closing. The investor is locked up until the stock is registered.
Finally, Harlan Kleiman, the CEO of
Shoreline Pacific Institutional
Finance (which deals primarily with PIPEs), had this to say:
A popular misconception is that a company is in dire straits if they utilize
a PIPE transaction. This is inaccurate. Private placements are alternative
investments to the public market.
Private placements can be an excellent vehicle for companies to raise cash.
It is imperative, however, that the company understand what type of deal
structure and investor is best for it.