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Palm Gets Hail Mary From Bono's Elevation


Goldman Sachs shouldn't be the only thing we're angry at.

A genuine-sounding "Hello" from New York where we've long been regarded as selfless in our willingness to please the masses. Recently I've been somewhat obsessively defending Goldman Sachs (GS) against the politically motivated, Senate-grandstanding, witch-hunting populist garbage that is the SEC's case against Goldman.

As it turns out, you folks like having bad guys. The nice emails I got about my Goldman screeds were things like, "I like your rage and agree there's no case but, seriously, those Goldman guys are pretty freaking greasy." The anti-Goldman emails were more salty rather than greasy, even when you include the word for which I'm substituting "freaking." And I write for a financial website, which would presumably be pro-Wall Street.

A lesser man than me would snap at the hand that feeds him. He'd point out that winning by the existing rules, which Goldman did, isn't endearing but it's not a crime. It's fine to hate Goldman for any number of reasons, the most healthy of which is that it's good for a person to have a nemesis. For instance, I have fierce rivalries against Canada, people born from 1946 to 1964 or so, and some guy who sends me periodic notes just to let me know he still loathes me. It's like getting anti-birthday cards. Anyway, it's good to have healthy, albeit illogical, cold wars against a group totaling 100,000,000 or so people. At least for me; it keeps me on point. So hate Goldman; who am I to deny you the pleasure? Just don't stop at Goldman.

We know one thing from American history: To cleanse then rebuild herself, America needs an occasional diet of hate. So I'm not just going to believe in the marketing hustle that is the concept of "Main Street," I'm going to pander to it. It'll be like Leno's "Jay Walking" only less painful and sad to watch.

To start our unmasking evil with a bang, I've found perhaps the only non-Wall Street bigwig to rival Goldman CEO Lloyd Blankfein in terms amorally feasting at the blood-trough through which sluiced the home-owning intestine of a gutted American dream. Hide the women and children, shield your eyes if you squint at the site of evil! Ladies and gentlemen: U2's Bono.

Satan, relaxing at home

The pious rocker, African Debt Reliever, One-plugging hipster/poet ("don't believe in riches but you should see where I live") used some of the downtime he had from saving the world to co-found Elevation Partners with a long-time Silicon Valley stallion, Roger MacNamee. According to BusinessWeek and Bloomberg, Elevation raised $1.9 billion then sunk about 25% of that into Palm (PALM). But only suckers and Germans buy controlling interest in a failing phone company via common shares, not rock gods and one-time stock gods like Bono and MacNamee.

Elevation bought 30% of Palm for about $460. The dollars were standard issue dollars. What was purchased was less mundane than cash; it was some existing debt, preferred shares (more on those in a minute), three board seats, and the implicit peace of mind that having MacNamee and the guy who wrote "Achtung Baby!" on your team was the pathway to financial glory. If memory serves, Elevation also paid out a monster dividend from "extra cash." Straight off the balance sheet to the steak holders. As a financial decision it was akin to selling your blood over and over again until you go into shock. There's no such thing as "extra cash" unless you're Microsoft (MSFT) or Apple (AAPL). The cash was the coolest part of the deal for Elevation. Remember in Wall Street when Gordon is going to break up the airline? He was going to have to unload Bluestar all over the place, including to "the Mexicans." Bono and Roger just took a check.

The shareholders got something slightly different. Specifically, they got Rogered and Bonoed. You could argue that Elevation taking the loss on Palm and somehow getting Hewlett-Packard (HPQ) to up the offer was a gift to Palm shareholders. And it was. To the extent that I think U2 is playing this summer's barbeque. But if you bought common to bet alongside a smart guy and a saint in waiting you're down two-thirds in three years. If you've sold a gazillion albums and/or have a billionish dollars and the connections to be part of Elevation Partners, you made $25 million. Only about 5%, but remember that Palm is a company you strip mined; you bet everything on a phone that failed and were about to start losing hundreds of millions, more or less, every month.

Oh yeah. As "preferred shareholders," Elevation gets $8.50 per share on a good portion of its investment. "Preferred" can mean a lot of things. In this case it means, "any buyer of Palm must agree to Prefer to pay Elevation no less than 8.50 a share, even if that is 50% higher than common stock".

Palm has patents and other assets worth... something. Elevation could have scratched out something even if Palm completed its seemingly inevitable journey to $0. So they did the shareholders a favor. And cost them 65% in three years, paid themselves hugely, and made $25 million.

Does that make Bono Satan? Yes. It's also a ridiculously sleazy, poorly executed, self-serving financial deal that victimized pension funds and shareholders (some of whom may have lost their house! as a result) to the benefit of a self-righteous pop star and his super rich buddy. But it took place thousands and thousands of miles from Wall Street. That means one thing -- the hatred directed toward Wall Street must be redirected toward the real enemy: everyone with more than $50, but especially pompous rock stars whose next album is rumored to be a spoken-word acceptance speech for his long-expected Nobel Peace Prize.

As a society, we need to face the icky fact that companies like Goldman filled an existing need and bet one way or another. Bad taste? Who cares. Money tastes bad too but only if you actually eat it. Or we need to accept that the entire investment game is full of sleaze large and small and it's a problem with tentacles spreading countrywide. The malfeasance is the result of greed (love of money is the root of all evil, Bono). You literally can't legislate out of existent sinful thoughts and behavior. So you need to punish all the sinners.

I vote for the latter, my enraged brothers and sisters. I feel your rage and I'm always willing to jump on an angry bandwagon! I say Bono gets called to the stand for the next Senate Pistol Whipping! Start with making him explain the PopMart album. Then ask him if he's aware he's just like the organized crime that once ran the casinos in now lily-white Nevada. Ask him if he knows he's Satan, earaches, and the feeling you get when a pet dies combined! He's why Main Street sits homeless, ironically listening to Joshua Tree.

Ask him if he knows he compares unfavorably to Goldman Freaking Sachs!
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