Podcast market is about to crash.
Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
211–220 of 414 posts
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#212It is interesting how most M&A transactions trend to have a 30% premium above the trading price. I have tried to investigate why but could not find a good explanation to why this number is so prevalent.
> why this number is so prevalent It comes from a 2004 Delaware court case, which found “recent appraisal cases that correct the valuation for a minority discount by adding back a premium ‘that spreads the value of control over all shares equally’ consistently use a 30% adjustment” for the control premium [1]. (Under Delaware law, shareholders are entitled to the pro rata share of a company’s fair value. The courts c…
> Also, this one is a 15% premium [2]
Really? The sub-headline near the top of your link says 29%, so basically 30%.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#213I mentioned this already in a different thread but private equity behave just like adware companies that buy popular chrome extensions then ruined them for a quick buck. [1]
[1] https://arstechnica.com/information-technology/2014/01/malwa...
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#214This is a bit disappointing, as I really like Squarespace's website builder. IMO it's far superior to anything WordPress, Shopify, or Wix have put out in the last decade.
When I was choosing between squarespace and Wix, sqspace didn’t have a simple backup/restore function. Maybe they do now? That’s a really big product hole.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#215Earlier quoted context omitted.
> how they get people to loan them money when they know that they are just going to strip mine the company Because on average, target firms of leveraged buyouts become more productive [1]. That lets them pay back shareholders and lenders in most cases. The reason public perception is off is the size effect and availability heuristic. The first shows that big deals do badly [2]. The second means the last widely-report…
Here's the PDF so you can read more than just the abstract [1]. It's always hard to analyze anything this big, especially with something as vague as "more productive": > First, employment shrinks more rapidly, on average, at target establishments than at controls after private equity buyouts. The average cumulative difference in favor of controls is about 3 percent of initial employment over two years and 6 percent o…
> the PE firm is starting a 5-10 year project to strip mine the company for all it's worth and leaving a husk of a company that's loaded with the debt that was used to acquire it and no real assets
Long-term default rates for private-equity targets are low across markets [1]. Banks and leveraged-loan lenders tend to get paid back.
Also, most targets that later go public have low enough leverage to be able to immediately pay dividends [2]. You just don’t tend to hear about the specialty farm equipment maker IPO in most circles.
> that's a harder argument when squarespace doesn't seem to be particularly struggling
They’re turning hundreds of millions of dollars of revenue into hundreds of thousands of profits by spending hundreds of millions on sales and marketing.
[1] https://core.ac.uk/download/pdf/154670852.pdf
[2] https://www.darden.virginia.edu/sites/default/files/inline-f...
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#216Earlier quoted context omitted.
it has to be high enough to give the board enough cover that they're doing their fiduciary duty to existing shareholders
Maybe I'm missing something basic but that still doesn't explain why it's 30% and not 50%. I don't think purely qualitative arguments work here.
At 50% it might be easier to just buy up shares on the market til they have a controlling share. The number to do that sets a cap on what the buyer will pay. I don’t have numbers on-hand, but trying to move a majority of a company’s stock (buy or sell) can cause crazy swings. When I worked in hedge funds, it was a thing we worked around. Our larger trades would execute over the course of a day or several days to minimize our impact on pricing.
At 10%, many shareholders will feel that their risk-adjusted returns on the stock would do better than the buyout.
30% is likely below the costs to acquire a controlling share on the market, and above any reasonable belief in risk-adjusted returns for shareholders (barring exceptional companies).
A lot of it is wishy washy because it’s based on math, but math with presumptions baked in. How much do shareholders think their stocks are worth? How much would it cost to buy them on the open market? How much does the buyer think the stocks are worth? There are approximate answers to all of these, from which an even more approximate price needs to be determined.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#217Earlier quoted context omitted.
"Web3" was hijacked by cryptocurrency promoters as the marketing term for various get-rich-quick token schemes. (Generally what made them "web3" was simply that some venture capitalist had bought a bunch of the tokens early and would get to dump them on Coinbase.) If there's going to be a web 1.0 revival, maybe it needs to jump straight to version 5 to leave enough of a gap from the taint of blockchain...
I propose “Web 95”
Web X.
Wait, shit--
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#218Earlier quoted context omitted.
There's Wix, Webflow, and others already. Seems pretty crowded.
Most young folks don't understand URLs anymore? "Find us on App Store" or "Find us on Social Media" is the new internet. QR codes that takes you directly into a walled garden is the new web.
Rember AOL keywords?
Most people never understood URLs.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#219Earlier quoted context omitted.
"Web3" was hijacked by cryptocurrency promoters as the marketing term for various get-rich-quick token schemes. (Generally what made them "web3" was simply that some venture capitalist had bought a bunch of the tokens early and would get to dump them on Coinbase.) If there's going to be a web 1.0 revival, maybe it needs to jump straight to version 5 to leave enough of a gap from the taint of blockchain...
I propose “Web 95”
Web++ would get my nod
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#220Earlier quoted context omitted.
Would it have gone private if it was such a great business at this moment ? Squarespece looked like a fairly competent company, even as they were perhaps overspending on advertisement. Their competitors don't seem to be doing that much better except for Automattic perhaps.
Yes. Private equity likes cash making business machines.
The bet is they make money now, but could be trimmed and squeezed to make even more.