There is much talk, much too late of course, about the JOBS act. We warned about this inappropriately titled bill earlier, but as usual, when corporate lobbyists want, corporate lobbyists will get in Congress, no problem. The bill passed and was signed into law, despite having almost nothing to do with real jobs. Dealbook overviews what Wall Street is discovering after the Jumpstart Our Business Startups bill was passed, oops.
Provisions tucked into the so-called JOBS Act, or the Jumpstart Our Business Startups, will roll back some major securities regulations and parts of a landmark legal settlement struck almost a decade ago. That 2003 settlement built a Chinese wall between Wall Street research analysts and investment bankers, an effort to prevent analysts from improperly promoting stocks to help their firms drum up business from corporate clients.
Now many are pouring over the nitty gritty to see what this bill really does. It ain't lookin' too pretty. While being billed as something to give start up companies more sources of funding and flexibility, instead the bill appears to be a re-awakening of the great Dot Con IPO ripoff circle jerk that was going on from 1994-2001.
What was the great Dot Con? Basically some VCs would give their pal, fresh with a set of power point slides, millions to start up a company. Then, whether their buddy had a clue, product, business model or not, the real product roadmap was to get investment bankers, VCs, lawyers, auditors, plus a sprinkling of a few select newly minted executives, mega rich by taking the company public. That IPO or bust mentality went on even if that start-up hadn't made a dime and their so called product was a shit sundae with a cherry. The entire show was to make it to an IPO, where unsuspecting investors jumped on the latest hot thing being peddled by investment bankers and slapped with a strong buy rating by corrupt ratings agencies. These same investment bankers peddling some flaming technological pipe dream were in fact managing the IPO and making huge buckos in the process.
Now that the great MBS/CDO/CDS/SIV financial derivatives fiction blew up, investment bankers want their IPO ripoff machine back. What does it matter that the great dot con cost people their retirement savings, a recession and the destruction of hundreds of thousands of careers? What does it matter that real technological advances were canned, all on the whim of some evaluation and critiera hype machine to IPO time window requirement? That quick cash turn around chime is ringing the bell once again. After all, we're looking at a $100 billion Facebook evaluation over a friggin' like button. Surely there are more riches to be had by sending more useless email alerts connecting more acquaintances to send more emails around the Internets. Now that will cure the cancer cash cow for sure!
Bill Black in this crappy Skype video, gives a solid overview of the games Wall Street plays:
What's the deal with start-ups anywho? Well, the idea is someone comes up with something brilliant and wants to start a company. They need money to get the thing going. Patents alone are huge buckos, one needs a solid team of engineers to even get a decent prototype built. Why even proof of concept at the most basic level can cost over $100,000. Start-ups done right are good, start-ups done right innovate and start-ups can literally create new markets. Solid investors, IPOs can enable a company to stand on it's own versus having to sell out at a low ball acquisition figure to ancient, plodding, tech behemoths. That said, this bill is not really about that of course.
Elliot Spitzer, who actually went after the investment banks pimping bad Dot Con IPOs is calling this bill Return Fraud to Wall Street in One Easy Step Act:
Ten years ago, virtually all of the major investment banks on Wall Street were charged with a monumental deception of the American investing public: touting stocks as great investments when in truth the banks believed the stocks to be “dogs,” “pieces of ----,“ and worse. The banks did this because of the conflicts of interest woven into their business model. They were underwriting the very stocks they were also touting, making the investing public dupes helping the banks generate enormous fees.
Now compare the above to this Bloomberg Law interview with a MoFo attorney (I kid you not, this is the mnemonic for law firm Morrison & Foerster LLP). Can you see the spin here? The answers are almost like a glossy press release brochure from 1999. MoFo specializes in IPOs, were heavily involved in the 1990's Dot Con, Silicon valley Hype Machine and they stand to make a great deal of money from this bill.
More ridiculous, those salivating at big buck IPO underwriting fees and pre-IPO stock, are out in force peddling this bill. Does this say it all, as regulators warn, that we'll be seeing these same corporations and groups pushing their start-up snake oil similarly?
Notice how one never hears about company requirements, such as hire only U.S. citizens or say, only manufacture in the United States. Nope, no way in hell, they don't call venture capitalists vultures for nothin'. Instead we're hearing about Groupon, a.k.a. Pets.com 2.0, as some sort of great model for technology start-ups. We're sorry, but a glorified shopping coupon is not the type of technological innovation we really need to jump start the nation. Try sticking all of those discarded 50 something engineers in a lab somewhere and tell those people to create a start-up, complete with business plan, prototype and roadmap. Now we're gettin' somewhere. Or simply take some great research project, such as a distributed, peer to peer or PAN power grid system topology and make that happen with VC bucks. You can still get filthy rich while improving America, shocking but true. That agenda, of course, is not in these cats' playbook.
We're sorry boys and girls, but major innovation, technology paradigm shifts, more often come from dusty backroom advanced R&D labs, with very large budgets and resources, and after years of experimentation and effort. Even people who sat in their garages, did so for some time to come up with a solid. Blood thirsty VCs with their legions of IPO underwriters did not an Android make.
Of course corporate lobbyists ain't done yet. Now they are pushing for a tax holiday on overseas profits, refusing, of course to actually use those profits to hire Americans or invest in America.
Overseas cash and earnings stockpiles for 12 of the United States’ biggest businesses — from Microsoft to Merck — grew by about 20 percent in 2011, as most of them lobbied hard in Washington for a “tax holiday” to bring that money home at a steep discount.
A POLITICO review of annual reports and Securities and Exchange Commission filings shows that a dozen of the most vocal corporate critics of U.S. tax policy finished 2011 with more than $455 billion in cash, investments and other earnings held by foreign subsidiaries — up from $381 billion the year earlier.
Finally, just to make sure they have stuck a knife in 'er, making sure U.S. labor is done, these same corporations are demanding more foreign guest workers to displace Americans, labor arbitrage and technology transfer American innovation out to their new technology hubs in China and India.
Just what we need, yet another bubble, masking the never ending road to 3rd word status and poverty for most Americans.