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Fear and greed in the markets
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Is this any time to be an investor in alternative assets?
That depends on what kind of investor we're talking about. For a fearful investor, certainly not.
But selective types who are committed to the long haul are going to stay in the market. Some of them will even be more aggressive to seize upon the bargain opportunities. An accomplished stock picker from Omaha neatly summed up the wisdom of being greedy when others are fearful.
A disorienting reversal is underway in the markets, and it is instilling fear in many investors, especially folks who have been greedy during the go-go years. These players—many of whom never worked or invested during a down market—have now joined the fearful crowd, and they will fall to the sidelines.
- But I've checked in with a wide variety of skillful, experienced investors to take their pulse since the coronavirus has brought the world economy to its knees. Most of them are forging ahead, albeit while exercising more caution and advising their partners and portfolio companies to do the same.
- These investors tell me they will keep doing deals, maybe not as many as planned when this year began. And they will invest at lower valuations than companies were raising as recently as last month.
- Experienced GPs will keep on raising funds. But first-time and emerging partners—a category that has seen remarkable growth in the past few years, will likely be shunted aside in favor of managers with proven credentials.
- Nobody knows when this crisis will settle down, or how painful the economic retreat will be. But the market's new fearful investors have found their way to the exit.
—Alexander Davis, executive editor
alec.davis@pitchbook.com
More coronavirus news: Continuing coverage from PitchBook |
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Introducing PitchBook News on Twitter
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Keep up with our continuing crisis coverage, market analysis and all the latest breaking news from the PitchBook team. You no longer need to wait for the morning newsletter.
Join us |
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A message from Intralinks
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SS&C Intralinks' new DealVision accelerates and enhances buy-side due diligence
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For nearly a quarter of a century, Intralinks has been serving global financial industries with secure, innovative technology solutions that facilitate high-value transactions.
Our newest release is DealVisionTM, a due diligence solution purpose-built for the buy side that leverages artificial intelligence to enable deal managers to quickly organize deal documents according to their preferences, manage the team's due diligence evaluation and have real-time visibility into progress. These innovations help the buy side to make better buying decisions and move faster to diligence, enhancing productivity and outcomes on both sides of the transaction.
Learn more about DealVisionTM or schedule a demo. |
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Food fight: Read the latest Private Market PlayBook
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The world has changed dramatically since our latest edition of the quarterly Private Market PlayBook magazine went to press. However, the digital edition is ready, and the stories still carry plenty of significance, especially a prescient piece by Priyamvada Mathur about gearing up for gloomier times ahead.
A few highlights:
- Storm clouds: Some VCs are already bracing for the next economic downturn
- The worth of a fund: Calculating GP fund economics
- Food fight: Meat and dairy giants are under attack from plant-based food startups. Now they're punching back.
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All quiet on the IPO front
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There aren't any IPOs scheduled in the US this week, according to research firm Renaissance Capital, though two more special purpose acquisition companies from the Social Capital and Hedosophia partnership could price on a day-to-day basis. This comes amid a harrowing bout of volatility that has killed an 11-year bull market and sent Wall Street's fear gauge, the VIX, to peaks not seen since the 2008 financial crisis. The most recent company to price an IPO was biotech firm Imara on March 11.
Renaissance's IPO Index, which tracks the performance of newly public companies, is down 25% this year, in line with the S&P 500 and better than the Dow Jones Industrial Average or the Russell 2000. The year's most hotly anticipated debut was expected to be Airbnb's, though CNBC has reported the company has also been fielding calls from private investors. |
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Germany plans $538B fund to fend off foreign M&A
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| A shop in Berlin informs would-be customers that "we are temporarily closed." (Sean Gallup/Getty Images News) |
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Germany was already at risk of a recession before the arrival of the coronavirus, which has left its streets in silence and its economy in deep trouble. The falling markets have shaved billions off valuations and could increase the possibility of companies being snapped up at a discount by foreign buyers.
- In response, the government is seeking to create a half-trillion euro fund that would provide struggling businesses with the financial support needed to fend off takeovers
- Officials are also said to be considering direct support programs worth some €180 billion (around $194 billion), an amount that could grow to €700 billion
- The new fund is a level of state interference that many German politicians were harshly critical of when faced with a similar proposal in 2019
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A Q&A with the director of the Harvard Global Health Institute on how to build a better strategy for fighting pandemics. [The New Yorker]
Officially, we aren't in a recession yet. When it's all said and done, though, this might be an economic catastrophe unlike anyone alive has ever seen. [The Atlantic]
Workers from Uber Eats, Postmates and more weigh in on what it's like to deliver food in New York City during a pandemic. [Grub Street]
College classes from the couch? TikTok videos about food stamps? It's the new reality for America's $600 billion higher education industry. [Bloomberg] |
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Since yesterday, the PitchBook Platform added:
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2005 Vintage Global Funds-of-Funds
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Yuanfudao eyes $7B+ valuation
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| Yuanfudao, which offers an online education platform, is raising capital that could value the company at $7.5 billion, according to Reuters. Founded in 2012 and based in Beijing, the company has raised prior VC funding from investors including Tencent, IDG Capital and Matrix Partners China. |
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Mainframe grabs $8.1M in a16z-led round
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| Gaming studio Mainframe has reportedly raised €7.6 million (around $8.1 million) in a Series A led by Andreessen Horowitz. The Nordic startup is the developer of a cloud-native online server that operates games for up to thousands of players. The funds will reportedly go toward growing its teams in Helsinki and Reykjavik. Mainframe secured a €2 million seed investment in October. |
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Starsky Robotics shutters
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Brookfield-backed Convene lays off about 150
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| Convene, a live-event and co-working company, has laid off about 20% of its staff, or about 150 employees, according to Business Insider. The company blamed the effects of the coronavirus outbreak, which has halted the events industry and caused Convene to shutter dozens of event spaces. The New York-based startup has raised $436 million to date from Brookfield, ArrowMark Partners and others. |
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Dating.com Group secures $50M fund
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| Dating.com Group, which offers a social discovery platform, has raised a $50 million corporate venture capital fund. The Singapore-based company operates several online dating brands, including Dating.com, Dil Mil and ChinaLove; it plans to invest up to $5 million in early-stage startups. |
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"The year began slowly due to the government shutdown, which led to several firms pushing back their IPOs to Q2 and Q3. Further, WeWork's failed IPO plans, which began in August of Q3, led to a level of skepticism of private market valuations from public market investors and subsequently a poor showing in Q4 2019 for IPO activity. With that said, there were still several notable exits in 2019."
Source: PitchBook's 2019 Annual US PE Middle Market Report |
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