Bono Will Make Millions — But Not Billions — Off Facebook’s IPO
Bono is rich but not as rich as you have been led to believe in the last few days. A report at NME.com, which was picked up by Spinner, Huffington Post and the New York Post (which got a link from Drudge Report), claimed the Facebook IPO will earn the U2 singer around $1.5 billion and make him the world’s richest musician. It’s been tweeted, retweeted and posted on Facebook without question or skepticism. That’s a shame because Bono probably made $10 million or less Friday.
Bono is managing director at Elevation Partners, a private equity firm that acquired 44.7 million shares of Facebook on the private market for $210 million, according to various media reports. The value of those shares has increased sharply over the years as Facebook has grown to over 900 million users.
Bono, Elevation Partners Set to Win Big From Facebook Sale
Unfortunately, NME and other media outlets overlooked three important facts that have a direct impact the wealth generated by the IPO: Bono is one of seven managing partners at Elevation Partners, private equity firms keep only a small share of their profits and the firm sold only 11.5% of its shares on Friday.
Let’s start with the shares sold Friday. According to Facebook’s latest S-1 filing, Elevation Partners planned to sell 4.62 million of its 44.7 million shares. The firm had acquired its 44.7 million shares for a reported $210 million, or an average of $4.69 per share. At the offer price of $38, Elevation Partners grossed $175,654,000 and netted $159,954,000. But not all of that profit will go into the bank accounts of either Elevation Partners or Bono.
Private equity firms invest money on behalf of their clients and return to them the lion’s share of the profits. Elevation Partners will also keep a percentage of profits – this is typically around 20% but can vary from firm to firm. In addition, firms typically charge an annual fee based on the size of the fund. Some firms also charge a fee to investors for buying a company.
Elevation Partners’ share of its profit made Friday is probably in the area of $30.8 million. Bono’s take depends on the particulars of Elevation Partners and how it divvies up its profits. The company website lists six other managing directors excluding Bono, a senior advisor, two associates and seven-person administrative team. Bono’s share could be as low as $4.4 million, or one-seventh of the profit (there are seven managing partners). Facebook latest S-1 filing mentions only four of the seven managing directors: Fred Anderson, Paul Hewson (Bono’s given name), Roger McNamee, and Bret Pearlman.
A conservative estimate would be in the area of $10 million. Bono’s share would be higher if some managing partners take a greater share of the profit, or if he personally invested in the Elevation Partners fund that bought Facebook shares.
Elevation Partners and Bono don’t own 100% of the remaining 40.1 million shares, either. The company can lay claim to less than 20% of their current $1.46 billion value (as of 2pm ET Friday) because it will return 80% of the profit – or $1.17 billion at current valuation – to its investors (it will be less than 20% of their current value because Elevation Partners’ cost basis for the shares need to be taken into account). Bono will be left with an unknown fraction of that 20%.
Elevation Partners could fare better if its unsold shares increase in value. It’s entirely possible that Facebook shares could increase over time, although in the near term shares could stumble after the media hype dies down. In any case, it’s safe to say nobody at Elevation Partners will make $1.5 billion from its Facebook investment.
Amanda Palmer’s Kickstarter Hits 3/4 of a Million
Musician Amanda Palmer has topped $750,000 in pledges for her Kickstarter project. Funding for her new album, art book and tour stood at $750,229 from 15,308 backers as of Friday morning. The project launched April 30 and surpassed funding of $500,000 around May 4. Pledges will be accepted until May 31. ( Amanda Palmer’s Kickstarter page)
Ticketmaster CEO Nathan Hubbard Takes to Twitter to Talk Ticket Fees
Nathan Hubbard inherited a lot of contracts and history when he took over as Ticketmaster’s CEO in January 2010. As much as ticket buyers want ticketing fees to simply disappear, there are reasons why they exist and why various players are hesitant to let them go. The ticketing business evolved over many decades. Deals cannot be unwound on a whim.
To use a sports analogy, Hubbard is like a new general manager of a professional basketball team that didn’t strike the current arena deal, isn’t responsible for the players currently under contract and had no say in the league’s collective bargaining agreement with the player’s union. The fans want the team to improve immediately. The general manager publicly uses phrases like “long-term rebuilding” to temper expectations and install hope for the future.
You won’t find too many CEOs communicating openly with ticket buyers, but on Friday Hubbard took to Twitter to talk about the most hated aspect of ticketing – fees – and his company’s desire to make the ticket-buying experience more enjoyable. Hubbard was responding to a New York Times article that pulled back the curtain on the anatomy of ticketing contracts and the degree to which the various parties – artists, venues, promoters – depend on ticketing fees. Here’s a series of six tweets Hubbard sent out regarding the Times’ article:
1) Might get lost in FB IPO news, but it’s been a big week for press shining light on the underbelly of the live biz: http://mediadecoder.blogs.nytimes.com/2012/05/17/behind-a-bands-stunt-an-entrenched-world-of-ticket-fees/
2) Change cannot come w/o an acute understanding of how the industry works. Always amazed at how little fans, legislators, etc understand.
3) I was that way too as a fan, artist, competitor before I took this job. But the future of live hinges enhancing the fan experience.
4) It is inherently in our interest to create this change, but we cannot act unilaterally; we serve an ecosystem where content is king.
5) So for us, transparency and an informed group of fans are elemental to pushing through change to make our industry and company better.
6) Please keep engaging w/us in how to make live events even more amazing, and keep peeling back the onion to learn. Cannot do it w/o fans.”
Hubbard later exchanged tweets with a follower about the amount and presentation of fees. Fans just want to know the total price, not the face value and amount of fees, Hubbard wrote. “All-in price, spare the fan and behind the scenes let stakeholders determine who gets what.” Hubbard agreed with a Twitter follower that print-at-home fees are “dumb” but said Ticketmaster has been able to get clients “to eliminate them on a majority of [tickets]” and asks for their elimination on every new deal or renewal. ( @Nathan_Hubbard)