Whilst the world continues to look in fascination at the LinkedIn valuation and anticipates what wealth will be created for the founders of Facebook, Twitter, Groupon and their ilk, another company has announced a deal which may well outstrip them all.
Ceres is a seed manufacturer focusing on plants which are used for energy. Essentially, the plants grown from their seeds can either be burned as a fuel or generate oils which can be refined and used as fuel. Last year the company generated revenues of a few thousand bucks and losses of many millions.
The company has now announced an IPO on NASDAQ to raise $100 million. It is as yet unclear what market capitalisation this will generate, but it is easy to assume that the result will be a price to sales ratio in the stratosphere. Additionally, unlike Facebook or Twitter, whilst the company has spent plenty of private equity capital and Government grants, it clearly doesn't have many users of its products yet.
I haven't gone into the company in detail, but neither will many of the investors to whom this stock is promoted. I can hear the sales pitches about the multi-billion dollar opportunity. However, how many investors in this stock are really qualified to assess the risk of such an investment?
It strikes me that this is a capital raising that would be better done in the world of private equity until such time as the company has generated real commercial validation. However, I am equally sure that no PE firm would offer the valuation that they can secure courtesy of Goldmans and Barclays.
Clearly, it isn't just social media that is attracting excess at the moment.
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