Strike

Last week, a fellow E-Committee member, Mehyar Afkari, wrote a poignant piece on the over $2 billion dollar deal by Guggenheim Baseball Management to purchase the L.A Dodgers. The main question Mehyar brought up was just how this mammoth deal that makes the Dodgers the most valuable franchise in the world would be financed?

Earlier in the semester, Finance Society had the pleasure of bringing in David Becker of Inner Circle Sports to discuss this world of sports investing. Becker used the Dodgers as his primary example in explaining how teams are purchased or sold. Now I do not pretend to have a technical knowledge of investment banking, however, one concept seemed simple: when a person or entity purchases a new sports team, they pile on the maximum debt a team's balance sheet can handle and then pay the difference amongst a group of investors. So with a $2 billion purchase price that analysts believe is $800 million too much, the amount of debt taken on must be staggering. So what's next for the Dodgers?

With the enormous debt that stems from an inflated price-tag, the Dodgers have little room for team investments, the types of investments that win games and fill stadiums. Even with a reported $3 billion regional sports network deal in the works, the team must first win over land rights to refurbish its stadium, rights that were NOT included in that $2 billion figure. Magic Johnson may be loved in L.A; however, without proper investment in the right players, the fans will rebel. The "most valuable team in the world," will be expected to win multiple World Series titles, but with lack of extra funding, the Dodgers will be unable to attract stars that are demanding 6+ year contracts in the $100 million range. With the new management still in its infancy stage, perhaps I am being a little too critical. But for now, I'm calling this deal a strikeout.

-Aureen Sarker (Photo Credit: Fox)

Groupon's Little Brother Might Get Adopted

By Matthew Giacobbe

While the buzz coming out of the social media sector this week is Facebook’s acquisition of Instagram, investors should keep an eye on the recent news out of Travelzoo (TZOO). Travelzoo, which is the so-called Groupon (GRPN) of travel, has announced that it is putting itself up for sale this week. Travelzoo offers its users exclusive deals to destinations around the world. However, Travelzoo is more sophisticated than Groupon’s daily burger deals; it offers deals to stay at destinations like the world-renowned Ritz-Carlton hotels. What has sparked a flurry of interest around this company is that Amazon (AMZN) and Google (GOOG) have been rumored to be actively pursuing acquisitions to strengthen their own daily deal businesses. Travelzoo is especially appealing to Google, which recently acquired the restaurant review company, Zagat. Combining Zagat’s ability to recommend high-quality restaurants and Travelzoo’s ability to provide luxury deals related to travel and food would appeal to a similar demographic. Although Amazon’s deal business has been largely related to clothing it could easily expand their offerings and user base through such an acquisition. Additionally, LivingSocial could also be in the hunt in order to strengthen its deal portfolio and differentiate itself against its main competitor, Groupon. One thing is for sure though; the battle for Travelzoo will be fierce, as competitors vie for dominance in the daily deals marketplace.

Japanese Pharmaceutical Companies Continue to Expand Overseas

Takeda Pharmaceutical announced its decision to purchase the Philadelphia-based URL Pharma Inc. for $800 million this past Wednesday. This is a deal that follows Asahi Kasei Corp's $2.2 billion acquisition of the Massachusetts-based Zoll Medical Corp that took place last month. Japan is seeing a trend in expanding the horizons of its health care sector. The high price of yen, low cost of drugs, and losses of patents in the United States are driving the country to look overseas, the Wall Street Journal says.

It's interesting to see that Japan, a country known for its global detachment that stems from a historical background of geographic seclusion, (most Japanese can speak only Japanese, refrain from studying overseas, and are highly traditional in their beliefs) is making an attempt to extend its presence overseas. The recent deals raise attention to future acquisitions and large-scale involvement of Japanese companies. It will be intriguing to follow Japan, already one of the world's top superpowers, as develop its health care sector. The deal is expected to close by June.

Chris Kim

Facebook has agreed to a deal to buy the photo-sharing-application company Instagram for $1 billion. This is the social network’s largest ever acquisition in a move that many see as an attempt to bolster the company’s value before its impeding Initial Public Offering. This is a huge price tag to pay for a company previously valued at around $500 million that has very little revenue. The factor that may have caused Facebook to pay so much for Instagram is its rapid growth. Facebook decided that the best way to prevent a possible competitor from continuously growing in market share was to buy it out completely. Facebook also has wanted to make a push to increase its revenue stream from mobile site usage, which is rapidly outpacing the website’s growth. This is a huge departure from Facebook’s normal strategy of buying out small companies and signals a change in mindset for Facebook’s top executives. How will investors judge this move by the social media giant? In what is expected to be Silicon Valley’s largest-ever IPO, investors will have to decide if Facebook is making this acquisition in order to grow or if it was just a move to eliminate potential competition.

Michael Felicetta

The Latest Trend: Social Networking, Mobile Commerce

If 10 years ago someone asked you to join on with Facebook and become a partner, would you do it? Mark Zuckerberg’s roommate had the option but declined. Right now, everyone is trying to get a piece of Facebook once they become a public company valued at 10 billion dollars.

What if in 1995 when the Internet was just getting started and someone asked you to join Amazon, would you do it? 17 years later, they are a multibillion dollar company posting record sales and growth.

These two sites caught on to an early trend, the Internet. Back in the 90s, it used to be an exclusive privilege, one that those who had it found very frustrating. Not being able to use a household phone and the Internet at the same time was a common complaint, but also the speed of the network was unbearably slow. However, if you invested in Amazon when it was worth $1.50 a share and cashed in when it reached its high of 246.71, you could have potentially made a 16400% gain in a matter of approximately 15 years. Pretty amazing if you ask me.

Like all trends, it appears that Amazon seems to have reached its pinnacle and now is on the decline. Its release of the Kindle has not been very successful as it has been competing with Apple’s iPad for the market. However, these past 5 or 6 years have been the prime of Internet expansion. I remember the days when people, such as parents and friends, told me that putting credit card information on Internet shopping websites would lead to your information being stolen and such various rumors. Now days, people have multiple credit cards signed up on different websites, and everyone checks the box, “I have read and understood the terms and conditions,” without ever reading the terms and conditions. Clearly, the Internet is in its prime as millions of people blindly trust online websites with their privacy and require it for almost any everyday activity.

Looking forward, I see growth and expansion in the mobile industry. If you observe people today, what are two things that they always turn to with free time? Facebook, or their cell phone. What do people go on when they open their cell phones? Facebook. The power of Facebook is completely underestimated. When Jeremy Lin became a star, I didn’t find it on the news first; at least 20 Facebook statuses informed me about him. Similarly with the smartphone industry, the use of the Internet from phones has exponentially grown as companies such as AT&T have to limit the amount of data people can access from their phones. The once prized unlimited data plan is now being capped at a certain level, and people who exceed the limit will be penalized.

Because of the recent explosion in social networking sites and use of applications on smartphones, it appears that the next big trend will be with mobile commerce and Facebook commerce. Zynga has already integrated itself on iPods, Androids, and Facebook, while other companies shift gears to target the 800 million subscribers of Facebook. Imagine a shopping website where one can have a credit card stored on Facebook and a cell phone to shop from. You don’t have to be sitting at home for this, nor do you have to take trips to stores on your way back home. While sitting in class or at a meeting, people can press a few buttons and buy whatever they need and want. That’s powerful.

By Kunal Agrawal

FS UPCOMING EVENTS

Bloomberg Assessment Test Information Session

Date: Tuesday, April 10th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch LC-25

Join Finance Society and Bloomberg Institute this Tuesday and learn more about taking the Bloomberg Assessment Test (BAT). The BAT is a standardized exam for students to demonstrate a mastery of business-related concepts. The BAT also allows students the opportunity to gain exposure to global employers. Bloomberg Institute maintains an anonymous database of BAT performance and showcases these results to over 20,000 global employers. The BAT will be held on April 20^th.

Steven Jon Kaplan: Contrarian Investing

Date: Thursday, April 12th, 2012
Time: 12:30 pm - 1:45 pm
Location: Tisch 200

Join the Finance Society this week as it welcomes Steven Jon Kaplan. The primary topic of his talk will be "Why Technical Analysis No Longer Works, and What to Do About It". He will describe the history of technical analysis, how most of its methods were designed shortly after World War II, and why it began to become progressively less successful during the past few decades. He will also discuss his own method, which takes advantage of the fact that so many people are attempting to use charting and other momentum strategies in their trading. You can learn more at http://truecontrarian.com/.

Week Recap: Professor Damodaran and Professor Cooley

Two weeks ago, we had the privilege of bringing in two of NYU's most reputable and successful professors. On Tuesday, Stern's very own Professor Aswath Damodaran talked to the Finance Society about the various components of corporate valuation, giving us a perspective on how to look at equity in the market. The notion of intrinsic value was particularly interesting. Often at Stern we talk about strategy and the benefits of mergers, and often we assign too much weight to intangible concepts such as 'synergy' and 'control.' Professor Damodaran warned us to be wary of these words when looking at the intrinsic value of a company, something that cannot be discounted. He also went into greater detail on many of the line items in a financial statement and how to look at them.

On Thursday we invited in Professor Thomas Cooley to speak about some of his latest macro-economic research. Professor Cooley, the former dean of NYU Stern, began by looking at trends in capital flows over time. He then tied these trends to differences in demographics between countries suggesting that the social and political differences amongst countries has an effect on where capital flows to over time.

The week saw two of our most successful 'Professor Series' events and we hope to continue to bring in some of the top professors at NYU.

Finance Society Executive Board