During the visit, Atakhaniv was “deeply impressed” by the advanced technologies and sustainable practices employed at Beximco, according to a news release
Part 3: All the value we cannot see
Jeff Bezos, one of the richest people in the world, had no idea how the media business works. Neither did he have any interest in investing in this industry. Then why did he buy The Washington Post in 2013?
Published : 27 August 2020, 07:13 PM
Updated : 27 August 2020, 08:00 PM
The financials of the newspaper’s business were not promising at the time of the signing of the deal. As a high fixed-cost business, the nearly 150-year-old newspaper was bleeding money.
Reuters in a report during the change in the Post’s ownership said the prestigious US newspaper would have been worth closer to $60 million.
Bezos agreed to pay Washington Post Co $250 million for the Post and a handful of other newspaper assets.
In a 2018 article based on his interview, Forbes magazine gave an idea of what led Bezos to buy The Washington Post.
Bezos weighed these questions before investing in the media - “Is it an important institution? Are you optimistic about its future?”
He had to believe there was a pathway to recovery by using the internet, which destroyed most advantages newspapers had built, but it did offer “one gift: free global distribution”.
Bezos succeeded in his plan; it has been growing since he took over its ownership.
Reuters reported that EBITDA, or earnings before interest, taxes, depreciation and amortisation, posted by The Washington Post’s newspaper division in 2012, was $15 million.
Based on those estimates, Bezos paid about 17 times 2012 EBITDA.
Such a large premium essentially pays for intangible assets like the brand name.
Citing analysts and bankers, Reuters said that when it came to newspapers such as The Washington Post, the usual financial metrics did not apply. The price, as in the case of other trophy assets like sports teams, depended on what a buyer was willing to pay.
'ABNORMAL, IMAGINARY’ PRICE?
bdnews24.com has analysed the story of the change in The Washington Post’s ownership to make sense of the allegations brought by the Anti-Corruption Commission in a case that involves asset manager LR Global’s Tk 500 million investment in the country’s oldest internet news publisher.
Toufique Imrose Khalidi, editor-in-chief of bdnews24.com, sold 40,000 shares of his own and his company to LR Global in 2019. Each share with Tk 100 face value was priced at Tk 12,500, including Tk 12,400 as premium, which the ACC describes as the “highest ever price in Bangladesh” and “abnormal and imaginary”.
So how much premium is “abnormal or imaginary” when the shares of a non-listed company with goodwill and brand value gained from long-term business change hands?
In the first part of this series of reports, bdnews24.com discussed data from two other companies to understand how much premium is “abnormal or imaginary” when the shares of a non-listed company, with goodwill and brand value gained from long-term business, change hands.
The two companies' tangible assets might have been a factor in their valuation during the sales of their shares. But what will happen to the companies that have grown fast by leveraging the digital era with relatively less tangible assets?
bKash, which took the world by surprise with its rise in mobile banking, began its journey in 2010 as a joint initiative of Bangladesh’s BRAC Bank and US-based Money in Motion Inc.
The International Finance Corporation or IFC partnered with bKash in 2013. The company eventually drew investments from Chinese tech titan Alibaba four years later.
When the IFC made a foray into bKash in April 2013, the latter was a loss-making venture. The IFC paid $10 million or about Tk 850 million to buy 47,744 shares or over 12 percent of bKash.
The price of each bKash share in that deal was Tk 17,803, or 177 times the face value of Tk 100. After fast expansion, bKash posted Tk 487.8 million in profit in 2017. Its net asset value rose to Tk 27.89 billion and annual sales to Tk 17.59 billion.
The next year, bKash got another shot in the arm with the infusion of money from Alibaba Group.
China's Ant Financial bought a 20 percent equity stake, including preference shares, of bKash for Tk 7.5 billion.
Each of the 38,553 ordinary shares and the 55,733 preference shares of bKash – each with Tk 100 face value – was priced at Tk 79,750, or 796 times the face value.
Bangladeshi job website Bdjobs began its journey in 2000 with an investment of Tk 1.5 million. After 14 years, Australian employment marketplace SEEK bought 25 percent of Bdjobs at around Tk 385 million. Bdjobs was valued at Tk 1.5 billion at that time.
Four years later, SEEK showed interest in buying another 10 percent stake in Bdjobs. The Bangladeshi firm’s value surged to Tk 3 billion by the time. SEEK paid Tk 300 million for the 10 percent stake. It means Bdjobs sold a share with Tk 100 face value at Tk 15,980.
Do the accounts of transactions look abnormal or imaginary?
INTANGIBLE ASSETS
The value of a public or private limited company can be determined in three ways: assets, market value and earnings.
However, given the rise of the services sector globally, the income-based approach is widely used, regardless of whether the company is public or private.
The asset-based approach may be appropriate for a company that is not valued as a going concern and may be liquidated in the near-term.
The gold standard for fundamental analysis is based upon the present value of the future cash flow of any company — public or private across all industries.
This is how the issue of intangible assets as brand value becomes an important factor.
Professor Mohammad Musa, who teaches at United International University’s School of Business and Economics, told bdnews24.com that it must be understood that a company has a brand value when its cash flow growth is estimated high during valuation because the firm can keep product prices high if it has a high brand value. And high product price means an increased cash flow.
A spokesperson for bdnews24.com said a company invests in another only when the latter’s future appears promisingly profitable. LR Global did just that.
“If you want to make a valuation of a company like ours, you must prioritise brand value and the promising future in the digital media over movable and immovable assets. LR Global hasn't made a mistake in that calculation,” the spokesperson added.
Khalidi in a January article detailed the circumstances under which bdnews24.com entered the deal, where the money was, why he himself sold some of his shares and what happened after the deal.
He wrote that a merchant bank calculated the value of bdnews24.com at Tk 3.71 billion when the news publisher was discussing investment with different firms.
“The small — yes, small given the requirement of Bangladesh’s largest news publisher for its stability, growth, expansion, upgrades and above all liabilities accumulated over the years due to hostile treatment by a section of the advertisement industry operatives who wouldn’t budge unless you responded to their PR requests as well as others I would rather not specify at this stage — investment meant a lot to us. That would explain why a share valued at Tk 37,100 was dispensed for only Tk 12,500. We needed to clear unpaid salaries of colleagues, for many of whom the company was several months behind regular payment schedule,” he wrote.
LR Global CEO Reaz Islam
Reaz Islam, the CEO of LR Global who has more than 30 years of financial services and investment experiences, said during the
in 2019 that the primary driver for the investment was Khalidi and the brand he created “with sheer determination to preserve the value, integrity and quality of his content to retain, nurture and grow his loyal customers/readers with very limited capital.”
“Then, of course, we see the future potential of the brand, including building upon its strong existing core -- both horizontally and vertically -- servicing millions of readers in Bangladesh and beyond,” he added.
RELATED STORIES
Electric car sales will hit 17 million this year, compared to 14 million in 2023, with more than one in five cars sold globally set to be electric, the IEA said, predicting 10 million of those sales w ...
The Gulf nation seeks to create a trading corridor with Bangladesh's port
The special prayer session will be held at Falcon Hall in the city’s Tejgaon
