As we close in on the November 04 Presidential elections, the summer months electory issues include such topical matters as the war overseas in Iraq, the continuing campaign in Afghanistan, the economy, healthcare and while not on the tips of most Americans, the possible continued ending of the Cuban embargo. As the embargo enters its 5th decade, support for an open Cuba policy is growing. It seems outdated and odd that in light of the post cold war Russia and modernization of China that we would continue our isolationist policy merely to placate the modest, albeit unified Cuban American community. With Cubas military capabilities minimized, its socialist model rife with capitalistic elements and foreign private investments welcomed, it appears Americas position may be outdated in spite of President Fidel Castros continued leadership. At a recent Convention in Havana and utilizing a law enacted in 2000 by the Clinton Administration (sales on certain US products such as agricultural and packaged goods were permitted on a cash basis), some 150 US companies sold over $100M worth of goods. Approximately $700M has been purchased by Cuba to date under this law. Reforms have brought some economic relief to its citizens but old, established socialist rigidities still control the borderline 3rd world economy. Cubans are a well-educated and entrepreneurial people and would welcome a greater American and Western influence. An end of the embargo would also allow American companies to compete with European and Canadian firms for numerous economic opportunities. Without the US embargos political crutch utilized by self-serving Cuban politicians, undoubtedly new ideas and the entrepreneurial spirit would overwhelm old dogmas. With successful socialist reforms in China, Vietnam and Russia, the 11 million citizens of Cuba have excellent blueprints to follow. With the recent death of President Ronald Reagan, perhaps we should learn from the successful strategy employed during his Presidency against the Soviet Unions communist bloc: direct contact, diplomacy and magnanimous gestures to encourage change. President Bush has demonstrated no desire for détente, Senator Kerrys position, like most of his positions, remain undeterminable. Perhaps the timing is ripe to enjoy Cuban culture (cuban cigars and mohitos, my personal favorites) firsthand!
|
The trouble with real life is that there is no danger music.
|
|
- Jim Carrey
The Cable Guy |
The financial markets and the venture capital industry have continued its modest improvements since the beginning of the year. There remains however unsteadiness as to the Feds interest rate policy sending the yield of the 10year Treasury note to a 2-year high. The Dow Jones and NASDAQ composite index remains approximately flat for the year. The wealthy continue to invest in stocks (World Wealth Report, Merrill Lynch) increasing their holdings to 35% of their portfolios. The venture capital community has likewise seen a more aggressive deployment this past quarter with a trend expected to continue through the hot summer months. Several companies such as Salesforce.com have recently gone public and are trading at a healthy premium (up 50% as of this writing). Could this be the beginning of the reopening of the IPO market and end of the tech-stock bubble burst? The pace of investment in new companies has picked up 28% from a year ago to $11.3 billion (Venturewire) and VC fundraising has begun again. Hot sectors include anti-spam software, nonotechnology, wireless, internet advertising and videogames. With VCs still flush with cash and raising more, there is a growing pressure to deploy it. Even seed and early stage companies have received funding, 36% of VC in the second quarter according to Price Waterhouse Cooper.
The private equity business is likewise enjoying a modest resurrection. A recent interest has been the luxury-goods business. Bear Stearns private-equity unit announced its investing $240M in lifestyle and luxury-goods companies in the US and is partnering with several, high powered European private equity funds. While this market is a risky one (see the successes and failures of such brands as Bulgari, Bruno Magli, B&B Italia, Bally ), Europe is littered with small to medium sized family-owned companies that need international scope and market-oriented management to grow. While indeed risky as its very dependent upon the economy, clearly this has become an area of interest.
|
The trouble with eating Italian food is that five or six days later youre hungry again.
|
|
- George Miller
|
Another interesting new trend in financial services and corporate finance are the proliferation of PIPES (private investment in public equity) and a new found interest in the Pink Sheets. The PIPEs Report estimates that since January, close to $9B of PIPES have closed of which $1B represents deals of $2M or less for small, obscure penny-stock (below $5 per share) issuers. While clearly investors need to carefully review the target company, it has become a prevalent vehicle for smaller, publicly traded companies with need to raise capital and can offer interesting opportunities.
|
There are lots of terrible lies going about the world and the worst of it is that half of them are true.
|
|
- Winston Churchill
|
The past quarter was a relatively quiet one at WPs in which we focused primarily on our current portfolio of emerging growth, public and privately held companies. We were very pleased to have been instrumental in assisting one of our oldest portfolio companies, Synergy Brands (NASDAQ SYBR) which recently announced that it agreed to sell its wholly owned B2C Cigar operations Gran Reserve to a public shell and thus create a separate, publicly traded entity. Bill Rancic, the prior winner of Trumps popular TV show The Apprentice, will serve as Chairman of the new public entity. Also, congratulations to SYBR for recently being named once again as one of Long Islands Top 100 Public Companies (Press releases on both available on yahoo finance under SYBR or upon request). We are likewise pleased to introduce to the WPs family of Investment Banking Consulting Clientele: Cymbiotics, Inc. (San Diego, CA), Migosa, Inc. (New York, NY), Prodisplay Limited (Leeds, UK), Micro Alagae, Inc. (Santiago, Chile), Securit-e-Doc, Inc. (West Palm Beach, Fl.), ROO Media, Inc. (ROOG, Melbourne, Australia) and IdentiMetrics, Inc. (Malvern, PA). Finally, congratulations to both ChemBio Diagnostic Systems, Inc. (CEMI), ARC Communications (ACOC) and their respective management teams, e.g. Lawrence Seibert of CEMI, Aaron Dobrinsky and Frank Elenio of ACOC, as both companies completed their reverse mergers and financings.
Finally, were recently lost a great American Ronald Reagan, our countrys 40th President. He was our Commander In Chief throughout most of the tumultuous 80s. He brought back hope after years of economic volatility and despair and presided over the fall of the Evil Empire, the Communist powerhouse, former Soviet Union. While the pomp and circumstance of his national funeral educated the young, reminded those of us whom lived through his era how he brought renewed hope and a smile to the White House and warmed the hearts of his contemporaries, we should be reminded that those who fail to learn from the past are doomed to repeat it.
|
To Ronnie, well done, thou good and faithful servant.
|
|
-Former UK Prime Minister
Margaret Thatcher |
Sincerely,
WELLFLEET PARTNERS
Note: This report was produced by Wellfleet Partners, Inc. (WPs) from various public research sources, for the sole purpose of general information. WP makes no warranties to its factual content and is not a brokerage firm, registered Investment Advisor nor securities dealer; therefore, nothing contained in this report shall constitute an offer to sell, solicit or buy any securities or investment advice. Investment in these securities mentioned here involves risk and should not be considered without first reading the target Companys most recent financial statements, 10Q and 10K, its Private Placement, Offering Memorandum or Business Plan, if applicable, and discussing the investment with your registered representative or professional financial advisor. Venture capital and investment in the market is inherently extremely risky. Mr. Lev, the author of this newsletter as well as other members of WPs and SR, are registered representatives of J.P. Turner & Company, LLC, and NASD member broker-dealer principally headquartered in Atlanta, Georgia.