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Rating:Son, Mansueto and Armour Should be All Smiles Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, May 04, 2005

Son, Mansueto and Armour Should be All Smiles

Reported by Sean Hanna, Editor in Chief

Masayoshi Son and Joe Mansueto and Tim Armour should each be smiling this morning as each has proved their critics wrong.

Monday, Son -- the Softbank CEO and early investor in Yahoo -- was able to flip his stake in Morningstar for a nice gain, proving that he had not overpaid for a minority stake back in the summer of 1999 after all and perhaps making him the only investor to cash in on both ends of the Internet boom.

Before the auction started many on Wall Street thought that Softbank would be lucky to get a price at the low point of the IPO range of $16 to $19 quoted by underwriter WR Hambrecht. Instead, Son's Softbank Finance sold it shares in a Dutch auction Monday afternoon for $18.50 a share to pull in $140.6 million. It had purchased its shares for $91 million in July of 1999, a mere nine months before the air came out of the venture capital boom.

Softbank walked away with 7.7 percent annualized return on the investment. Not bad considering that many of the VCs closing deals in the summer of 1999 for content companies -- what Morningstar was at the time -- walked away with nothing.

Tuesday, it was Mansueto's turn to prove the critics wrong as Morningstar shares went up in price to a point well above their IPO range.

Traders bid the shares up more than 8 percent to 20.50, proving they liked the business, even though publishers are typically low multiple companies and Morningstar has managed to only eek out small profits despite quick growth.

This morning the stock opened at $21.29 and had gained another two percent plus by mid-morning.

Those gains put Mansueto, who founded the fund tracker in his apartment in 1984, halfway to his first billion.

The successful IPO also underlines a savvy bet made in the 1998 ex-Stein Roe president Timothy Armour. He bailed out the cash-flow challenged company in 1999 in what was intended at the time to be bridge financing to an IPO. Armour also bought himself a job, signing on as COO of Morningstar.

He had to wait eight years for this day, but it looks like that bet has also paid off. 

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