How Amazon transforms investor tension into creative tension — Lou Shipley

MIT Sloan Lecturer Lou Shipley

MIT Sloan Lecturer Lou Shipley

From Forbes

One of the big financial stories of 2014 has been Amazon versus its investors. The company’s stock, after climbing nearly 40% in 2013, started to slip early this year, then plunged 11% on the last day of trading in January. Throughout February, the stock remained in the doldrums.

Investors, it seems, are weary of Jeff Bezos’ practice of plowing Amazon’s oversized revenue into secret projects designed to grow the massive company even more. The stock’s big drop in January coincided with the company’s announcement that it planned to raise the price of Amazon Prime, a sign that investors don’t trust management to use whatever money the price hike might generate to benefit shareholders.

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Why the next big ideas might not get money they need — Jean-Noel Barrot

MIT Sloan Assistant Professor Jean-Noël Barrot

MIT Sloan Asst. Prof. Jean-Noël Barrot

From WSJ MarketWatch

Concern is mounting that the venture-capital model might be broken. Returns have been relatively poor in the past decade. More importantly, perhaps, the innovation outcome has been somewhat disappointing. As PayPal cofounder Peter Thiel complained, “We wanted flying cars; we got 140 characters.”

One key reason for this might be the way venture-capital funds are typically structured. Such funds have been organized for decades as limited partnerships, raising commitments among external investors to be invested and returned within 10 years.

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Twitter’s missing tweet: Timely IPO data — Nemit Shroff

MIT Sloan Assistant Professor Nemit Shroff

MIT Sloan Assistant Professor Nemit Shroff

From WSJ MarketWatch

It’s widely believed that uncertainty is bad for business. If you don’t have the right information, you make the wrong decisions. Or you make no decisions at all. We saw this play out during the financial crisis when there was quite a lot of uncertainty and many investors held back.

With that in mind, my colleagues and I recently looked at the effect of having greater financial information available within an industry. Specifically, we studied the impact of public firms on an industry, as public firms are required to disclose large amounts of information. They have to issue quarterly financial statements and provide information on operational details such as business strategy, expected future outlook, and business risk. Financial analysts and the business press provide even more information on those companies. Taken together, that disclosure activity can improve the information environment for firms in that industry by reducing uncertainty.

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Jump into crowdfunding? Don’t be a greater fool — Howard Anderson

Image Credit: Forbes.com

From Forbes

When Congress passed the Jumpstart Our Business Start-ups Act (“JOBS Act”) last year, the rationale sounded right: some “good ideas” don’t come to market because entrepreneurs often lack the necessary connections to privately raise significant amounts of capital. If they could get such funding, the argument went, jobs would be created. And that’s a good thing.

So part of the JOBS Act now permits private firms, including start-ups, to seek equity investments without registering shares for sale, though only from accredited investors. But if implemented, other provisions of the law would allow entrepreneurs and others to use crowd sourcing or social media to troll for money from virtually any would-be private investor. And that’s not such a good thing.

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IPO opportunities in the cloud — Charles Kane

MIT Sloan Sr. Lecturer Charles Kane

MIT Sloan Sr. Lecturer Charles Kane

From the Boston Business Journal

IPOs are making a comeback, according to Ernst & Young. E&Y surveyed 300 institutional investors and found that 82 percent had invested in IPO or pre-IPO stocks in the previous 12 months, compared with only 18 percent in the prior two years.

While the rebound has occurred across industries, investors clearly like certain kinds of companies more than others. Biotech has had a string of successful IPOs. This infusion of capital will allow companies to get their products to market faster, which should get us closer to curing or combating diseases. The social media industry also has been drawing IPO investors of late, despite Facebook’s bungled IPO in the spring of 2012.

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