Archive for the ‘securities and exchange commission’ tag
When Algorithms Go Wrong
“The stock market today is a war zone, where algobots fight each other over pennies, millions of times a second…inevitably, at some point in the future, significant losses will end up being borne by investors with no direct connection to the HFT world, which is so complex that its potential systemic repercussions are literally unknowable.” Felix Salmon
I’ve written about algorithms before. I think it’s inevitable that the trading of media space will become ever more automated. Price customisation software will play an ever bigger role in the optimisation of pricing. And I think algorithms are fundamental to the future of content. But what about when they go wrong?
A fortnight ago, a computerised trading programme belonging to leading US stock broker Knight Capital Group ‘ran amok’, with staffers at Knight unable to stop it trading for more than half an hour. The result was a near fatal $440 million loss, the company kept alive only by emergency financing, and now in a position where it is likely to have to sell off parts of its business to keep going.
On May 6th 2010 in the so-called Flash Crash, algorithmic trading contributed to the second largest point swing and the biggest one-day point decline in the history of the Dow Jones Industrial Average, as it lost about 9% of its value, only to recover those losses within a matter of minutes. A joint report by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission identified how an unusually large sell-off of E-Mini S&P 500 contracts by a large mutual fund firm had initially exhausted available buyers, but then off the back of that how high-frequency algorithmic traders had then started aggressively selling, accelerating the effect of the mutual fund’s selling. The report portrayed “a market so fragmented and fragile that a single large trade could send stocks into a sudden spiral.”
Such algorithmic trading is more common than you might think. As of 2009, High Frequency Trading (HFT) firms accounted for 73% of all US equity trading volume. HFT uses algorithms to make highly complex decisions at lightening speed before human traders are capable of processing the same information. Automated trades are used on the buy side (by pension funds and mutual funds for example) to sub-divide large trades to minimise market impact and risk (and in some sense hide what they’re doing), and on the sell side (by so-called market makers and hedge funds) to provide liquidity to the market. Many however, have questioned the value of that liquidity saying that it “has a rather ghostly quality and tends to vanish when needed most”.
The animated GIF above shows the amount of high-frequency trading in the stock market from January 2007 to January 2012. It shows not only the rise in HFT over that time but a world that, as Felix Salmon of Reuters noted, “in aggregate seemingly has a mind of its own when it comes to trading patterns”. The stock market, says Salmon, is clearly more dangerous than it was in 2007 incorporating a much greater tail risk and yet in return for facing that danger, “society as a whole has received precious little utility”.
Automation and algorithms are changing the structure of our markets. That much is perhaps inevitable. But is it right that in the quest for speed and frequency we are building the kind of systemic risk whose scale may be unknown but which could well impact far outside the domain of the financial markets?Personally, I think not.
HT to @BBHLabs for the Felix Salmon link
As Marissa Mayer Annoys Investors By Keeping $4.2B In Dividends, YHOO Is Down 5.4%
Less than a month after taking over Yahoo, Marissa Mayer is already sending strong signals of leadership to investors. Yet, the announcement of a new financial strategy led to a 5.37 percent downturn of YHOO today as the company played down dividend expectations.
Yahoo filed with the Securities and Exchange Commission that the strategy review “may lead to a re-evaluation of, or changes to, our current plans.”
In particular, following the announcement in May that Yahoo would sell half of its 40 percent stake in the Chinese company Alibaba for $7.1 billion, investors believed that the after-tax cash proceeds — $4.2 billion — would go back to investors in the form of dividends.
Shareholders rejoiced, but with another CEO came another plan. Mayer has just scrapped the plan of distributing dividends in order to “enhance long-term shareholder value” as she wrote in the SEC filing. According to Reuters, the board of directors still backs Mayer’s long-term plans.
In addition to the new dividend plan, the French news agency AFP reported that the business review could lead to “revaluating or rethinking our current plans, including our company reorganization and our share buyback program”.
Once again, Mayer is borrowing some ideas from Google, her previous company. Google is known for not issuing dividends to its shareholders. By doing that, she gives the impression that she is in charge of Yahoo and ready to take bold decisions. But investors seem to value short-term returns over a long-term vision.
Now, we are left wondering what Yahoo will do with this cash on hand. It could acquire some companies, invest it or keep it for a while.
$7 billion would come in very handy to help Marissa Mayer reinvent Yahoo
Can $7 billion save Yahoo from the scrap heap of irrelevance? That’s a question for new CEO Marissa Mayer, who looks to be clearing the decks in preparation for significant changes to Yahoo strategy.
In May of this year, Yahoo agreed to sell half of its stake in Chinese e-commerce giant Alibaba for about $7 billion. At the time, Yahoo’s chief financial officer Tim Morse planned to return the cash to shareholders — a feel-good quick hit, perhaps, but hardly something that would revive the company.
But new CEO Marissa Mayer, who is already bringing a new product focus to the company, may have different plans.
In an 8-K filing with the Securities and Exchange Commission that Business Insider noticed today, Yahoo states that it is re-evaluating those plans as Mayer restructures the company and looks for acquisitions.
Yahoo CEO Marissa Mayer
Here are the relevant excerpts from the filing, titled “New Chief Executive Officer and Review of Business Strategy:”
Ms. Mayer is engaging in a review of the Company’s business strategy to enhance long term shareholder value.
As part of that review, Ms. Mayer intends to review with the Board of Directors, among other things, the Company’s growth and acquisition strategy, the restructuring plan we began implementing in the second quarter of 2012, and the Company’s cash position and planned capital allocation strategy.
This review process may lead to a reevaluation of, or changes to, our current plans, including our restructuring plan, our share repurchase program, and our previously announced plans for returning to shareholders substantially all of the after tax cash proceeds of the initial share repurchase under the Share Repurchase and Preference Share Sale Agreement we entered into on May 20, 2012 with Alibaba Group Holding Limited.
Judiciously spent, $7 billion might be the ticket to help the once-proud internet giant regain some of its former glory. That may only be seven Instagrams, but there are plenty of other startups available for significantly less money. Super-angel Dave McClure has already suggested buying properties around fashion, shopping, and women.
And while Pinterest might be a little pricy — it was already valued at $1.5 billion in May of this year, and traffic continues to grow — TheFancy has recently been in the acquisition rumor mill.
The only problem?
Yahoo is not great at creating lasting value from acquisitions. Talk to Flickr or Delicious. Or Broadcast.com.
One thing I will say: If anyone can figure it out, Mayer can.
Image credit: Gl0ck/ShutterStock
Filed under: deals, media, VentureBeat 
Google Ventures Joins DocuSign’s New Funding, Round Grows To $55.7M
Looks like electronic signature company DocuSign wasn’t quite finished with its fundraising when its Series D was revealed last month — today it’s announcing a new investor.
The funding was first disclosed through a filing with the Securities and Exchange Commission, with the company then confirming that it had raised $47.5 million in a round led by Kleiner Perkins Caufield & Byers, with Kleiner partner Mary Meeker joining the board. Accel Partners, Comcast Ventures, SAP Ventures, and “a large global institutional investor” also participated.
Raising money from Kleiner is already pretty impressive, but DocuSign has added another big-name investor — Google Ventures, whose investment increases the round’s total size to $57.5 million.
The company has now raised a total of about $114 million. When the round was first announced, CEO Keith Krach told me that it would be spent on research and development, expanding into new industries, and international growth.
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Facebook Losses Slice UBS Profits (The Wall Street Journal)
The fallout over Facebook’s initial public offering escalated Tuesday as UBS AG went on the attack against Nasdaq OMX Group, blaming the stock-exchange operator for trading flubs that erased a sizable chunk of its second-quarter profit. The Swiss banking giant, in its earnings release on Tuesday, accused Nasdaq of “gross mishandling” and said it would begin legal proceedings to recoup all of its losses related to the problems, totaling $356 million. Reuters UBS did not fully explain why its losses were 10 times worse than other market makers, raising questions about how much liability Nasdaq could actually face. Meanwhile, Facebook shares fell to a new all-time low Tuesday, touching $21.61 in afternoon trading. Los Angeles Times The bank’s losses, and its determination to take legal action, could complicate Nasdaq’s plans to compensate brokerages that lost money in the much-hyped offering. Nasdaq last week filed a plan with the Securities and Exchange Commission to offer $62 million to repay investment firms that lost money in the process. TechCrunch One hundred two million people accessed Facebook solely from mobile in June, a massive 23 percent increase over the 83 million mobile-only users in March. And almost 19 percent of its 543 million monthly mobile users don’t even visit its desktop site. CBS News A photo of Mitt Romney on Facebook is at the center of a recent domestic abuse case in Tennessee. Lowell Turpin, 40, accused his live-in girlfriend of having an affair with a man he did not recognize in a photo on her Facebook page. continued…
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Nearly 20% of Facebook’s mobile users skip the website altogether
Facebook users are increasingly passing up the company’s ad-laden website for a mobile-only experience, according to new information disclosed by the social network today.
Nearly one in five of Facebook’s 543 million mobile monthly active users (MAUs) — 102 million to be exact — accessed the social network exclusively from their mobile device in June. Even more telling is that the number of people going mobile-only has increased by 23 percent in just three months.
“Approximately 102 million mobile MAUs accessed Facebook solely through mobile apps or our mobile website during the month ended June 30, 2012, increasing 23% from 83 million during the month ended March 31, 2012,” Facebook said in a quarterly report filed Tuesday with the Securities and Exchange Commission.
Facebook also said in the report that the sequential quarterly growth in daily active users from 526 million to 552 million was almost entirely driven by mobile usage.
“The number of DAUs using personal computers was essentially flat and declined modestly in certain key markets such as the United States and Europe, while mobile DAUs continued to increase,” the company said.
The explosion of Facebook’s mobile usage is by now a well-documented fact, but the revelation that a sizable portion of mobile users are skipping the website altogether makes more apparent the riskiness of Facebook’s business.
The social network began showing Sponsored Stories, or status updates that double as ads, to users in the mobile News Feed earlier this year. The new revenue stream, which brings in roughly $500,000 a day, contributes just a small fraction to overall revenue.
Unsurprisingly, mobile was identified by CEO Mark Zuckerberg as a top priority for the company in Facebook’s first earnings call with investors and analysts.
“Mobile is a huge opportunity for Facebook,” he said. “On average, mobile users are around 20 percent more likely to use Facebook on any given day. So mobile not only gives us the potential to connect more people with our services, but it also gives us the ability to provide more value and a more deeply engaging experience.”
Zuckerberg also referred to the company’s efforts to generate revenue on mobile as “an encouraging start.” The statement, along with several others made by Zuckerberg and COO Sheryl Sandberg on the call, seems to paint a picture of a mobile Promised Land where advertisers and the company can reap the rewards of an active audience that’s blossoming with each day.
The reality, however, is a bit gloomier when you consider that 23 percent more mobile users chose not to visit Facebook’s website than in the previous quarter. Facebook can’t inundate the mobile user with as many ads as it can on its website, which means the company is essentially losing money on every user that goes mobile-only.
Facebook may be sticking to its mobile-opportunity-knocks mantra, but Wall Street isn’t buying it. The stock closed down 6 percent at $21.71 Tuesday and is bumping up against the all-time low of $21.61 in after-hours trading.
Photo credit: fiduz/Flickr
Facebook Spent $24 Million On Acqui-hires, $633 Million On Patents During The First Half Of 2012
Facebook has become known for making a good number of talent-focused startup acquisitions, aka acqui-hires — but the cost of each deal is normally kept under wraps. In a regulatory quarterly filing the company made today with the Securities and Exchange Commission, though, it put an aggregate pricetag on all those “non-material” sized deals it made in the first half of this year: $24 million.
Here’s the wording from the document:
“During the six months ended June 30, 2012, we completed business acquisitions for total consideration of $24 million. These acquisitions were not material to our condensed consolidated financial statements individually or in the aggregate.”
From January through the end of June, Facebook made six acquisitions, two of which — Instagram and Face.com — were of material size. That leaves Tagtile, Glancee, Lightbox, and Karma as the buys on which Facebook spent $24 million total.
It bears mention that this does not mean that there was a $24 million cap on what the founders of these startups received as part of their decision to join Facebook. Salaries, bonuses, and the like are not included in this figure.
Here’s the breakdown of where that money went (click to enlarge):
Facebook also broke out the exact amount of money it spent on acquiring patents and IP, that it was pretty significant: $633 million. The bulk of that — $550 million — went to its purchase of hundreds of AOL patents from Microsoft. Facebook spent $83 million total buying 750 patents from IBM . The remainder was spread across other deals. The company detailed the spending in the document like this:
“During the six months ended June 30, 2012, we acquired $633 million of patents and other intellectual property rights. We completed the largest of these acquisitions in June 2012 under an agreement with Microsoft Corporation pursuant to which we were assigned Microsoft’s rights to acquire approximately 615 U.S. patents and patent applications and their foreign counterparts, consisting of approximately 170 foreign patents and patent applications, that were subject to an agreement between AOL Inc. and Microsoft entered into on April 5, 2012. We paid $550 million in cash in exchange for these patents and patent applications.”
Josh Constine contributed reporting to this article.
Marissa Mayer’s confusing salary: She could get $60M for her first year
Yahoo revealed Marissa Mayer’s starting salary today, which may top out at around $60 million in her first year at the media company.
Yahoo filed Marissa’s salary offer with the Securities and Exchange Commission today. She will earn a base salary of $1 million annually with a considerable amount of equity on top of that. Mayer had her first day at Yahoo on July 17, after leaving an executive position with Google, where she was the 20th employee.
There are number of estimates floating around about Mayer’s salary, mostly because of how confusing the wording is in these agreements. We’ll try to parse it for you:
Mayer will make the extra money from participating in Yahoo’s “executive incentive plan,” which provides equity awards based on performance goals. Given this program, Yahoo will provide Mayer with an extra 200 to 400 percent bonus of her annual salary pro-rated for 2012. The target equity award for people in the EIP is typically 200 percent of the annual salary.
She will also get $12 million annually in restricted stock units and in stock options, which will vest over the next two-and-a-half years.
Mayer will further get a one-time retention award of $30 million in cash and stock, which is basically just an incentive to stay for five years — the time it takes to vest.
On top of all of that, she will get $14 million in “make-whole” to make up for money she left un-vested at Google.
But in the crazy wording of these types of financial filings, we very well may have missed or miscalculated something. Which is why Brainstorms came up with this little chart, which we expect to be on soon:
Filed under: VentureBeat 
E-Signature Company DocuSign Raises $50M, Kleiner’s Mary Meeker Joins The Board
Electronic signature platform DocuSign has raised $50 million in Series D funding. The round was first revealed in a filing with the Securities and Exchange Commission, and the company just sent me a few details.
DocuSign has also confirmed that Mary Meeker, the Kleiner Perkins Caufield & Byers partner (and former Morgan Stanley analyst) who’s most famous for her reports on the mobile industry, is joining the DocuSign board. It looks likely that Kleiner led the new round, but neither DocuSign nor Kleiner has confirmed that. (For now, the company will only say that the funding comes from “premier investors, public funds, and strategic tech-industry leaders.”)
Founded in 2004, DocuSign describes itself as “the industry standard in electronic signature” — and that’s probably a fair description. The company says 18 million people have used its products to sign 120 million documents, and that more than 150,000 documents are “DocuSigned” every day.
DocuSign previously raised a total of $56.4 million from Frazier Technology Ventures, Ignition Partners, Sigma Partners, Scale Venture Partners, Salesforce.com, and others, with its Series C announced in December 2010.
I’ll be speaking to CEO Keith Krach later today and will update this post with his comments.
WiFi Chipmaker GainSpan Grabs $6.5 Million Funding, Looking To Raise $13.5 Million More
GainSpan, a Silicon Valley company that deals in low power WiFi semiconductor technology, is looking to raise a total of $20 million in a new round of funding, according to a filing made today with the U.S. Securities and Exchange Commission.
GainSpan has closed on $6.47 million of the offering, leaving some $13.53 million in equity left to be sold. The filing, which was signed by CFO Dennis Wittamn, did not disclose who has participated in the round so far.
If the entire $20 million is raised, it will bring GainSpan’s total VC investment to around $76 million. GainSpan’s last funding round was an $18 million Series C that closed in December 2011.
GainSpan makes ultra-low power embedded wireless chips, modules and related software that enable various devices and objects to be connected to the Internet — purportedly bringing us closer to living in the much-buzzed-about world of the “Internet of Things” where nearly every object, from kitchen gadgets to thermostats to pacemakers, has some kind of web connectivity. The company was founded back in 2006 and counts Intel Capital, New Venture Partners, Opus Capital, OVP Venture Partners, Sigma Partners, and Camp Ventures as investors.
We’ve reached out to GainSpan for comment on the new funding, and will report back with any new information we receive.