Our view is that semiconductor growth rates have compressed to a level such that inventory cycles are not able to drive equity valuation outperformance.
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While many industrial companies could benefit from this potential near-term sales spike, those that are not well-positioned to sustain their gains will quickly fall back from an equity valuation perspective.
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Equity returns before valuation adjustments are a function of earnings growth (which have their root in GDP growth) and dividend yield including stock buybacks.
Raising equity at that valuation is out of the question, and with conventional bank loans in China having a maximum term of one year, Tri-Tech turned to the bond market, a new source of capital in China, to obtain longer term financing.
I.e. when you do raise an equity round, the valuation may be below the cap.
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For example, investors in hedge funds and private equity face uncertainty about precise valuation of their investment.
Also, according to JPMorgan equity strategist, the relative valuation of equities is much more attractive when compared to bonds.
If you raised money in an equity round at a high valuation, you may find that if you need money you can only get it at a lower one.
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Under these conditions, equity is overpriced relative to a valuation which fully accounts for the conflicts of interest between minority and majority investors.
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One useful tool: convertible notes that turn into equity upon a startup's next valuation.
The study showed that the companies that had the highest levels of gender diversity also had higher returns on equity, operating results and growth in market valuation than the averages in their respective sectors.
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Yes, there are some investors that are willing to recoup their investment in the form of dividends from the profit stream, but the majority of investors are looking to acquire an equity stake in the company at a low valuation and then receive a big payout when the business is sold in the future.
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However, equity will have to be cherry-picked on a valuation basis.
This month the Private Equity Industry Guidelines Group, a collection of big investors and private-equity funds, unveiled guidelines intended to help standardise the valuation of investments in non-listed companies.
Separately, given the multiple contraction in Chinese equity markets, we believe a slightly more conservative approach to valuation for Alibaba makes sense.
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Hawkins and Cates completed a lengthy sum-of-the-parts valuation of Dell that blasted the founder and private equity shop Silver Lake Partners for low-balling.
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Negotiations with private equity firm Blackstone for a sale of the telecom tower unit also reportedly fell through over valuation.
As bottom up, research driven, value investors, we at Teton employ many of the same metrics in the valuation of our portfolio candidates as criteria used by strategic corporate buyers, and private equity outfits.
Snowling ticks off other advantages for Sallie: low interest rate risk (given government guarantees), profit growth expectations in the 15% range, a rich return on equity (net income divided by average book value) of 38%, and a cheap valuation relative to history and the broader market.
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