Google went public on August 18, 2004, at a price ($85) that was literally underpriced from its auction clearing price. (We know this because "winning" bids were allotted 75% of what they asked for at a particular price. The clearing price would have been the price at which 100% of the bids at that price were filled.) What happened then? There was a pop, an 18% pop that is almost exactly average for first-day pops, and the shares closed at a little over $100. Then what happened? They sort of went down. By September 3, Google shares were at $100.01, lower than the closing price on opening day. Then what happened? You know what happened. Google is at $600/share now, and hit $700/share in December 2007 (those were the days).
Why do I bring this up? Because I have been fascinated with IPOs for a long time, and I have written three articles about underpricing here, here and here. Reading about the Facebook IPO, all the questions, criticisms and insights seem very familiar. So, once and for all, I think we need to come to terms with two things, teach journalists about these two things, and then calm down about IPOs for the rest of the history of capital markets.
1. First-day pops are meaningless. Say my house is worth $300k. If I list it for $290k, and someone buys it and then immediately resells it for $300k, then this doesn't mean my house is worth any more than if I had originally listed it for $300k and it sold. Or, if I listed it for $310k, and the buyer resold it for $300k. These are all $300k houses. In the first instance, I left some money on the table, which makes the second instance more attractive to me. But none of these scenarios changes whether my house is worth $300k or not.
Now, some people would argue that pop creates value. That if onlookers see someone resell my house immediately for more than she paid, they will be attracted to my house and may purchase it from the second buyer for more than $300k. This may in fact be true, given the amount of uninformed trading associated wtih IPOs. But, eventually the price will return to $300k. If the pop creates value, it is created for someone other than the seller. The argument that the seller benefits is tenuous -- the seller may reap the benefits in a follow-on offering or via "good feelings" for its retail brand.
Could the absence of a pop destroy value, even if temporarily? Maybe. The confusion and criticism over the Google IPO may have caused its price to struggle the first few weeks. But then fundamental value caught up.
2. First-day pops are meaningless. It bears to be repeated. Studies have shown that firms with the biggest pops (60% or more) have the worst one-year returns of all issuers in that same year. Anecdotally, we know that some firms with the largest pops (Webvan, mp3.com, VA Linux) don't even exist in the same form any more. First-day pops are not correlated with long-term value.
So, was Facebook's IPO successful? This all depends on what the definition of success is. If "successful" means "had an initial offering price that rose on the first day," then no. If "successful" means reaped the optimal amount of capital for its shares, then maybe so. I think it's interesting to think about the Facebook IPO with the Google IPO in mind. That IPO was considered unsuccessful by many. There were technological glitches. There were last-minute disclosure snafus. It was August. It was a slow time for technology IPOs. At the last minute, a bunch of insiders sold their shares, too. Rumors suggested that Google paid a very low commission to its lead underwriter. None of these things had anything to do with the fundamental value of Google, and time bore that out. I say let's see.
The post-mortem on Facebook's IPO is well underway. Who's to blame? There's an argument for the answer "no one"--after all, if the IPO's goal is to raise money for the company, Facebook accomplished the mission by not leaving a penny on the table. Indeed, it reached into investors' pockets and grabbed a few dollars, to boot.
From investors' perspective, however, the IPO was a bust. The SEC and Congress are investigating. Without further ado, in no particular order, I present the Facebook IPO theories I've run across.
1. CFO David Ebersman. Ebersman is faulted for boosting the number of shares by 25% right before kickoff (money that, incidentally, went to investors rather than the company). According to the WSJ Ebersman did not defer to the bankers as companies typically do. And by letting outside investors get more than half of the IPO proceeds (57% according to WaPo), Ebersman arguably did leave money--Facebook's money--on the table.
2. Morgan Stanley: Lead underwriter, its job was to price at least accurately. Instead, it kowtowed to a heavyweight client and let itself (and its reputation) get used.The WSJ also makes it sounds like Ebersman, rather than the bankers, set the final price of $38. Normally I tell my students the company plays the role of "concerned spectator" in the final pricing decision. Facebook was doing a whole lot more. By the way, did you know that the underwriter discount was only 1.1%? The underwriter's discount is the cheaper price at which the banks buy the shares from the company. They then turn around and sell them to the general public at the IPO price. The spread is their automatic profit, and the compensation they get for the risk of the deal and for providing price support. Typically the spread is more like 5-7%. Wow. Morgan Stanley may have bungled this offering, but am I the only one that feels a little sorry for them?
3. Goldman Sachs. Always a popular villain, Goldman's sin was telling clients earlier this month that they were revising downwards their projections for Facebook's earnings. Morgan Stanley did the same thing, but Goldman is the perennial favorite if you're going to launch an I-bank conspiracy theory. Lawsuits have already been filed alleging selective disclosure.
4. The secondary markets. Rich Karlgaard of Forbes: "Facebook‘s shares have been dead in the water for the last 12 months. Private investors had already bid up Facebook to a $100 billion value a year ago."
5. Zuckerberg: Christine observed months ago that Zuckerberg has almost secured paranoiac control of the company. And he couldn't be bothered to lose the hoodie.
6. Nasdaq: Technical glitches, delays in trading, FINRA investigations. Oh my!
7. Timing: Rich Karlgaard again:
From Facebook’s shares debuted in a cloudy market. Beyond Europe in 2012, May is a bad time to go public. For the past several decades, nearly all of the stock market’s gains have occurred between October and May. The canard “Sell in May and go away” turns out to be true.
If you see/have more theories, let us know in the comments.
After some hiccups, Facebook shares hit the market late this morning priced at $38, the high end of their target range. According to the WSJ's Deal Journal, "given the hype and demand the question has largely been “How big a pop is coming?” not “Will there be a pop?” For the record, two weeks ago I asked if there'd be a pop, and I'm still wondering.
Facebook shares opened at $42.05 and "then instantaneously hit $42.99, up 13% from its IPO pricing." But when I left for lunch shares were trading at a meager $39 and some change--more a bump than a pop. Now (1:30 EST) they're around $40, and they may well end up by close of business. Still, early reports characterize the IPO as "more whimper than bang", "fizzling", and "cool." Underwriters have reportedly been buying to prop up the price.
I observed regarding the Carlyle IPO "No first day pop means you didn't leave any money on the table. And that's a good thing, right? But that's not how it's playing in the press." A similar story seems to be unfolding with Facebook. Which leaves me with these unconnected thoughts:
1. Facebook's shares traded heavily on the private secondary markets, about which I've had much to say. Given those trades, there's more information about what Facebook shares are actually worth. Ergo, more accurate pricing. Ergo, less pop.
2. To the extent that the conventional wisdom is that the first-day pop is about branding, name recognition, and reputation building--um, Facebook doesn't need that. This IPO has dominated the business news. Facebook is the highest valued U.S. company ever at IPO, its $104 billion valuation dwarfing UPS's $60 billion in 1999. Pop, schmop.
3. There were some investors that were too late to the SharesPost/SecondMarket party. The last private auction sold Facebook at $44/share. Those buyers would have been better off waiting for the public sale with the rest of us. How unhappy are they? And...will they sue?
4. Zuckerberg, Goldman Sachs, and the other early investors who are cashing out don't really give a damn about a first day pop. So what if the IPO investors don't see an immediate return? Zuckerberg & Co. maximized their first-day take by pricing the shares accurately, and they're laughing all the way to the bank.
Update: FB closed up 23 cents. So no pop to speak of.
Yesterday private equity giant Carlyle priced its IPO at $22, below its initial range of $23-25, looking for a first day pop (according to the WSJ). It couldn't find it, and closed yesterday up just $0.2%. Also in the IPO news, Facebook set a range of $28-35, valuing the company at $96 billion, lower than some valuations had suggested--and,notably, lower than the most recent price on SharePost, $44. It looks like Facebook is looking for the first-day pop, as well.
Why? There are 2 dominant stories for IPO underpricing, one sinister and one innocent. Both hinge on the fact that in an IPO investment banks act as intermediaries, buying the company's shares at a discount and then turning around and selling them to the public. The sinister story blames greedy investment bankers that strong-arm companies into asking too little for their shares so that the bankers can curry favor with their clients. The innocent one chalks underpricing up to information asymmetry: it's hard to gauge the true price of a stock that hasn't been traded, and uninformed investors will shy away from the market entirely unless they can be enticed in with the prospect of a sure thing. (Steven Davidoff has a characteristically incisive review of all the underpricing theories here).
Here's what I think is weird about the recent IPO news. First, Carlyle is a sophisticated player, not your average Groupon or LinkedIn to be victimized by investment banks. I could see Carlyle's management saying: "You know, we want to raise as much money as possible, first day pop be damned." No first day pop means you didn't leave any money on the table. And that's a good thing, right? But that's not how it's playing in the press. Carlyle's IPO is "unimpressive," "lackluster." Uh, how about "shrewd" or "accurately priced"?
Facebook's IPO is interesting because it lacks the information asymmetries that plague the typical IPO. We know Facebook's market valuation as measured by sophisticated, er, accredited, investors. As Davidoff writes, "Underpricing has also been found to be lower when information about the issuer is more freely available so that uninformed investors are at less of a disadvantage." Yet Facebook is pricing quite a bit lower than the last SharesPost sale of shares. Which suggests either 1) that the information asymmetry story is wrong, and that management and/or the banks purposefully leave money on the table for their own sinister purposes. Or 2) that the secondary market isn't particularly good at valuation.
Last month I predicted that SharesPost would be in trouble if there's no first day pop. Today's WSJ quoted an investor that was pretty sanguine about it: John Landis bought at $31-32/share, and he's still hopeful that he'll make money, speculating that the low end of the range might be a "tactic to build excitement for the IPO." The WSJ didn't quote any investors who bought Facebook at $44/share. I know what they're hoping now. We'll have to wait until May 18th to find out.
Glom readers know I've been thinking about Special Purpose Acquisition Corporations (SPACs) for a while now. Yesterday Justice Holdings Ltd. (listed on the London Stock Exchange), announced that it would take a 29% stake in Burger King, buying from private equity firm 3G Capital, Inc., which took the company private only 18 months ago. After the acquisition the company will trade as Burger King Worldwide Inc. on the NYSE.
According to Bloomberg Businessweek, Justice Holdings, a SPAC started by Nicolas Berggruen, Martin Franklin and Ackman, raised 900 million pounds ($1.4 billion) in a February 2011 initial public offering in London.
From the WSJ:
The decision to go public again was driven by building momentum at the restaurant chain, with the deal providing Burger King a chance to list itself without going through the time-consuming process of a traditional initial public offering, Burger King Chief Financial Officer Daniel Schwartz said Tuesday.
"This route allows management to focus on running the business," Mr. Schwartz said.
This probably the most high-profile SPAC acquisition ever, and certainly in the past few years. While our work focuses on domestic SPACs, it's definitely an international phenomenon.
The Facebook registration statement was filed today. If you were Facebook, how would you grab the attention of investors?
Think big: "Our mission is to make the world more open and connected."
The sales pitch is pretty simple: growth, growth, growth!
The first Risk Factor? "If we fail to retain existing users or add new users, or if our users decrease their level of engagement with Facebook, our revenue, financial results, and business may be significantly harmed."
The purpose of the IPO? "The principal purposes of our initial public offering are to create a public market for our Class A common stock and thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an orderly distribution of shares for the selling stockholders."
Their strategy in a nutshell: expand and monetize.
Carlyle Group is the next in a line of private equity firms to want to go public in an initial public offering. Our old pal Victor Fleischer has written extensively about one of the first of these publicly traded partnerships from the buyout firm industry and the tax manueverings of these PTP IPOs. Well, Carlyle's IPO rings with a different controversy.
Having first filed for an IPO in September, Carlyle filed its second amendment this month, which contained an interesting new item in its "Risk Factors" section. The following appears under the heading "Risks Related to Our Organizational Structure":
Our partnership agreement will contain provisions that require individual arbitration of any disputes arising out of or relating in any way to our partnership agreement or the common units, including those under the federal securities laws of the United States. Accordingly, you will not be permitted to bring any such claim in court or as part of any representative or class proceeding and your cost of seeking and obtaining recoveries may be higher than otherwise would be the case.
And, to be specific, this means claims relating to:
the provisions of our partnership agreement (including without limitation the validity, scope or enforceability of the arbitration provisions of our partnership agreement or the arbitrability of any such claim, suit, action or proceeding);
• the duties, obligations or liabilities of us to our common unitholders or our general partner, or of our common unitholders or our general partner to us, or among partners;
• the rights or powers of, or restrictions on, us, our common unitholders or our general partner; • any provision of the Delaware Limited Partnership Act or other similar applicable statutes;
• any other instrument, document, agreement or certificate contemplated either by any provision of the Delaware Limited Partnership Act relating to us or by our partnership agreement; and
• the federal securities laws of the United States or the securities or antifraud laws of any international, national, state, provincial, territorial, local or other governmental or regulatory authority, including, in each case, the applicable rules and regulations promulgated thereunder.
And, just in case you were wondering, readers are told in bold that claims may only be brought to the artbitrator in the investor's individual capacity and arbitrators may not consolidate claims. copies of the LP agreement have not been filed with the SEC yet, but reports say that arbitration would be held in Wilmington, DE.
This report quotes a lot of folks, including law prof Don Langevoort, on whether this provision would fly with the SEC, which has to approve its registration for IPO. This provision actually modifies the affect of the securities acts, which might peeve the SEC. Apparently, the SEC has said no to this kid of thing before, but not with a PTP and not since 1990, which seems like an entirely different era as far as investor rights go.
As an observer, this kind of provision makes me nervous for investors. However, as a law professor, I think it would be fascinating if the SEC okayed the provision and the IPO went forward. Think of the interesting questions that might be answered if one or more (hopefully a lot more) public companies had these kind of waivers: Would shareholders demand to pay less for no recourse to class-action securities claims? Would different kinds of shareholders care? Ironically, small shareholders might not care at all because they rarely follow class actions for their shares anyway, but large shareholders might care a lot. Would companies with these types of waivers disclose more or less? More accurately or less accurately? Could this be similar to dual class common, an evil that shareholders really didn't care about?
In 2010 I blogged about David Kirkpatrick's business history, The Facebook Effect. Earlier this week, the California Legislative Analyst's Office invoked Kirkpatrick's title to speculate about tax revenues from a Facebook IPO. From the Overview of the Governor's Budget:
The Facebook Effect. Facebook Inc., a privately held company headquartered in Palo Alto, may proceed with an initial public offering (IPO) of its stock in 2012. Facebook reportedly is considering issuing $10 billion of stock in an IPO that would value the company at over $100 billion. Other companies also are considering IPOs in the coming years.
In the coming months, the state’s revenue forecasts will need to be adjusted somewhat to account for the possibility of hundreds of millions of dollars of additional revenues related to the Facebook IPO. These revenues could affect the budgetary outlook beginning in 2012-13. We caution that it will be impossible to forecast IPO-related state revenues with any precision, and it is likely that little information about the state revenue gain from the Facebook IPO will be available before investors file tax returns in April 2013. (Even then, due to the confidentiality of individual taxpayer information, we are unlikely to know precisely how much state revenues increased due to Facebook’s IPO.)
In considering the size of the Facebook IPO effect in the coming months, revenue forecasters will have a difficult task. Our office’s income models are based on historical trends and, therefore, already assume that some level of IPO activity occurs for California companies each year. Moreover, in our recent forecasts, our office has deliberately built in “extra” capital gains (above those generated by our model) in 2010, 2011, and 2012 to try to account for a variety of factors, including the surprisingly strong PIT receipts in some recent months. Finally, Facebook-related capital gains likely will prove to be a relatively small percentage of California’s overall capital gains in 2012. If the stock market as a whole has an unusually strong or weak year, that fact could change forecasted capital gains up or down by much more than the positive Facebook effect.
In case you missed it, the projected size of the IPO is $10 billion, and the expected valuation of Facebook $100 billion! For a sense of perspective, Google sold $1.67 billion in its IPO in 2004, giving Google a valuation of more than $23 billion.
Usha has already blogged about the possibility of Facebook foregoing the traditional bookbuilding IPO in favor of an online auction. In 2004, I first wrote on the online auction as an alternative to a traditional IPO in Moral Hazard and the Initial Public Offering. At the time, I argued that online auctions could yield a higher price for the issuer due to the underpricing phenomenon. However, after that article was published, online IPOs slowed to a trickle, absent the one highly publicized Google IPO, which was not technically a dutch auction at all. (Here is a listing of all online auctions to date. There have been no new IPO auctions since 2008.) I wrote about the Google IPO in this article, What Google Can't Tell Us About Online Auctions (and What it Can).
I finally came to the conclusion that auctions were great at capturing the market price of an issuer's shares, without the underpricing discount; however, investment banks are able to increase the market price so the end result to the issuer may be the same or greater. This led to the third article, Initial Public Offerings and the Failed Promise of Disintermediation. I think the Google IPO is a great example of this. Google, which was just as hot in 2004 as Facebook is in 2011, believed quite correctly that it did not need Wall Street to sell its shares. The public did not need to be sold on buying Google. So, if you have the most fabulous house in a hot market, you can do FSBO. But, Google actually needed Wall Street to buy, which didn't happen. The larger institutional investors sat out and the analysts were very negative, rightly or wrongly. Now, Google's share price has never looked back, so I'm sure Sergey and Brin aren't shedding any tears. But, Facebook might think twice about deciding to go it alone on sheer Palo Alto power alone.
So, in case you haven't looked at your retirement savings the past week, stocks have taken a beating lately. Because of this, stories are popping up suggesting that the tech IPO boom version 2.0 may slow down. Groupon and Zynga filed registration statements this summer, but have not launched yet. (Groupon's Amend. No. 1 here; Zynga's Amend. No. 1 here).
So, how have this Spring's tech IPOs fared? I looked at Zipcar, Linkedin, Pandora and Zillow. Yes, they have all gone down recently, but all are down from their high trading first days. Zipcar priced at $18 on April 14, opened at $30 and rose to $31.50. Today it is $22. Linkedin priced at $45 on May 19, opened at $83, and rose to $122. It's at $84. Pandora priced at $16 on June 15, opened at $20, rose to $26. It's $13.21. Zillow priced at $20 on July 20 and opened at $60, its all-time high. It is now at $26.80. In keeping with the IPO model, those who were allowed to buy stock at the IPO price are in the best position; investors who purchased the first day of trading, the worst.
And what about the Facebook elephant in the room?
As Christine has noted, IPOs are back, and that means fun for corporate law types. Today's front-page WSJ reads "Groupon to Gauge Limits of IPO Mania." Facebook, Zynga, and companies I'm not cool enough to have heard about are being floated as IPO candidates, and venture capitalists are salivating over the social network economy, both leading actors and bit-part players. IPOs are back, baby!
Except that they never really left. Rather, companies were accessing the public markets while skirting the regulations surrounding going public, by way of "reverse mergers." With a reverse merger, an already-public shell corporation acquires a public company. Presto, the once-private company trades publicly--generally over-the-counter, it's true, but publicly. Chinese companies in particular have used this method to trade in the U.S. Reverse mergers figure in today's WSJ because the SEC is examining whether audits of these Chinese firms were up to snuff. According to the article, since February about 40 Chinese firms have acknowledged accounting problems or had trading of their stock suspended for accounting issues.
Some readers might remember that I've been working on a special flavor of reverse merger, a SPAC. Among other things, it's given me a window into the world of OTC trading and the Pink Sheets--a world of tiny companies that don't usually make it to the paper or to the attention of law professors. They're not generally mentioned in the financial press, but there have been a healthy number of IPOs in this space.
I'd argue that we know relatively little about IPOs, but we know even less about this marginal world at the edges of securities law. More on SPACs, and on what they can teach us, at the end of the summer. I hope.
Last week, commentators were saying that LinkedIn was pricing its IPO shares low ($32-35/share, $3 billion valuation), possibly signaling a concern about a social media bubble. Well, apparently not everyone is afraid of a little frothy bubble action. A few days ago, LinkedIn repriced at $45. Way off.
Shares opened today at $83/share. Yes, you aren't having flashbacks -- Google priced at $85 and went up 18% the first day. Shares of LinkedIn were recently trading at over $120, and is right now at about $108.
So, time to brush off things we used to talk about when we talked about IPOs. Why so much underpricing? Mistake? Strategic on the part of the issuer? On the part of the underwriter? Who drove the run-up? Smart money? Herd money? What will the share price be in 12 months? 36 months? I love IPOs.
LinkedIn is set to issue shares in an initial public offering on May 19, and the share price sets a valuation on the social network company at $3 billion (share price range $32-35). Nice. LinkedIn is the first in a pipeline of new generation social media companies that everyone expects to go public: Facebook, Groupon, Zynga, Twitter, etc. Pandora is on its third amendment to its registration statement after filing in February 2011, but no IPO date has been set. Skype is also on its third amendment after filing in August 2010, and no IPO date has been set.
The question that analysts keep asking harkens back to the 1999-2000 tech bubble: Do the companies make a profit? Yes, they are cool. But shareholders need something more than cool after a month or two. LinkedIn generates revenue through a premium service for subscribers and advertising. It announced profits for 2010, but generated losses in 2009. Is LinkedIn's IPO a sign of a bubble or just a sign that the IPO market is returning from a cold, cold slump?
As an aside, how many academics use LinkedIn? I think I set up a profile over five years ago, but I'm more of a daily Facebook user. Academics have such a fine line between personal and professional existences that Facebook seems to have filled that niche. If I were practicing, I could see having a social network presence that was all business, though. And, Academia.edu tells me that 5 of my FB friends are on its site, which posits itself as both the "LinkedIn for academics" and the "Facebook for academics." Any Academia.edu aficionados?
We have been talking about "frozen" capital markets for so long, it may be hard to remember a time when money flowed freely, but that time may not be far way. After hearing news this morning of Hulu's plans for an IPO, I was thinking about the prospects for the IPO market during the coming year. We all expect GM to file for an IPO this week, and I am of the school of thought that figures a successful GM IPO will open the market for other firms. Listening to a local business executive whose firm is testing the waters, I think we will see a large number of firms take the plunge within the next year if GM is successful.
Marketplace had a story on IPOs this afternoon, but it also had an even more encouraging story about commercial paper. The market for commercial paper is humming, driven by low, low interest rates. Scott Grannis explains the (potential) significance:
Here's an obscure but important measure of credit availability and financial market health that shows dramatic improvement year to date: nonfinancial commercial paper issuance (i.e., short-term obligations of large, generally highly-rated companies, typically used to fund short-term credit needs such as accounts receivable and inventories). That this measure has jumped over 50% in less than eight months is a very positive sign in my book. For one, it means that credit markets are vibrant: not only are large corporations willing to take on extra debt, but investors are willing to buy it. And since commercial paper rates are extraordinarily low (about 0.25% for 60-day paper), the availability of very cheap financing appears to be encouraging companies to expand their operations.
The commercial paper market is only half what it was at its peak in 2007, but seeing the words "confident" and "vibrant" in place of "frozen" or "stagnant" is a nice change.
So, three years after KKR began planning an IPO, shares ("common units" or limited partnership interests) of KKR & Co. L.P. are trading on the NYSE. If we can even make our memories go back to a time before the 2008 financial crisis, we will remember when Fortress and Blackstone, two other private equity firms, went public, generating hundreds of millions of dollars in tax-advantaged gains to their founders. But KKR came a little late to the party, and ended up postponing its IPO, only to list its shares on the Euronext Amsterdam exchange through a foreign subsidiary, KKR & Co. (Guernsey) L.P. nine months ago. Today, all of the holders of KKR Guernsey units received units of U.S.-based KKR, and could immediately trade them on the NYSE. These units opened this morning at $10.50 per unit, and has gone up to over $11, but is now at $10.48 on what turned out to be a weak trading day.
Blogger Emeritus Vic Fleischer has been the go-to person on the tax implications of these private equity limited partnership IPOs for quite awhile. On his own website, he has written about this new KKR deal and the pending legislation that is putting pressure on the founders to sell their founding stock quicker rather than later.
No new shares were sold today, although the media is referring to the listing transfer as an IPO. However, the Prospectus for the registration of the new shares and the in-kind distribution note that the firm anticipates a "Public Offering" of $500,000,000 worth of shares:
Subject to market conditions, we are planning to sell common units in a public offering following the U.S. Listing, which we refer to as the "Public Offering". Assuming an aggregate offering amount of $500,000,000 at an offering price of $9.44 per common unit, which is the last reported sale price of KKR Guernsey units on Euronext Amsterdam on July 6, 2010, we would issue 52,966,102 common units in the Public Offering resulting in an aggregate of 735,973,522 common units outstanding on a fully diluted basis, with new common unitholders holding 7.2% of our fully diluted common units, former KKR Guernsey unitholders holding 27.8% of our fully diluted common units and our principals holding the remaining 65.0% through KKR Holdings. . . . . .None of our principals is selling any common units or will otherwise receive any of the net proceeds from the Public Offering, and any common units issued by us in the Public Offering would reduce the interests in our business held by KKR Guernsey unitholders and our principals on a pro rata basis. We have filed a separate registration statement with the Securities and Exchange Commission to register the Public Offering. There is no assurance that the Public Offering will be consummated as set forth herein or at all. The U.S. Listing is not contingent on the occurrence of the Public Offering.Vic explains that if Henry Kravis were to sell $500 MM of KKR units under today's tax regime, the tax bill would be $75 MM. If pending legislation were to pass and Kravis' gains were not taxed at capital gains rates, then the bill could be twice that or more. Though the Prospectus repeats several times that no principals will be selling common units in the Public Offering, the principals may intend to sell at other times. Did I mention how much I missed Vic?