Worst deals of 2007

Notice that even the "smart money" takes stupid decisions .........

The Public Invests in Blackstone Group It was only a matter of time before the private equity firms let the public in on the game — for an inflated price. Blackstone boss Stephen Schwarzman pocketed half a billion dollars on the firm's $4 billion IPO. Since the IPO debuted, the credit markets seized up and so has the deal flow. After closing at $35.06 on its first day of trading, the stock has slipped 38%. A classic case of selling at the top to the suckers, which would be us — oh, and China too, which invested $3 billion in Blackstone at the height of the leveraged-buyout frenzy. Other private equity IPOs, such as Fortress Investment Group and Och-Ziff Capital Management, took the same route.

Microsoft Overpays for Facebook Here we go again in technology land. Microsoft invests $240 million for a 1.6% stake in Facebook, plus the right to broker the social networking site's international ads. The deal gives Facebook an implied value of $15 billion, for a company expected to earn just $30 million in 2007 but is nonetheless considered the model website of the future. Er, wasn't that AOL a couple of years ago? Are we in 1999 again, or is Microsoft as prescient as it says it is? Remember Geocities (when Yahoo bought it) ?

Citigroup Sells Cheap to Abu Dhabi Citi needed cash in the worst way to shore up its leaky balance sheet in the aftermath of the subprime debacle that cost CEO Chuck Prince his job. And Citi got it. Petrodollar-rich Abu Dhabi Investment Authority bought 4.9% of Citigroup for a cheap $7.5 billion — and Citi is paying out a stiff 11% coupon to the Middle Eastern investment fund. Some analysts say that's way too high a rate. Maybe Citi should have gone to a bank for a loan.

Bank of America Sinks $2 Billion in Countrywide Financial Better make that $1 billion — at least that's what B of A's investment was worth as of December 1. Bank of America thought it had picked an opportune time in August to invest in Countrywide's mortgage machine, but the mortgage mess hadn't bottomed out yet.

Virgin Money Bids for Northern Rock The stolid English mortgage bank is deflowered by collateral damage from the subprime crisis. Although it's not a player in CDOs, it relies on short-term commercial paper for funding. So do CDOs. That market grinds to a halt. Result: a straight-out-of-the-Depression run on the bank, forcing the Bank of England to bail it out. Sir Richard Branson's Virgin's consortium offers to buy the Rock at a steep discount, diluting shareholders with a rights offering. Shareholders are not amused.

http://www.time.com/time/specials/2007/top10/article/0,30583,1686204_1686305_1692084,00.html