A string of bad bets saw the U2 singer dubbed the “worst investor in America”.
There are two Bonos within Paul Hewson: the anti-poverty campaigner and socially conscious artist, and the hard-headed business owner who’s courted controversy with his aggressive approach to tax planning.
As one of the world’s richest musicians, Bono’s approach to business has certainly paid off as far as his band, U2, is concerned. So it’s understandable that he might want to apply his business nous to investments too. Unfortunately, for the first few years at least, things didn’t go to plan. Elevation Partners is named after a U2 song, but the private equity firm was actually founded by investors Roger McNamee and Marc Bodnick, former Apple CFO Fred Anderson, and former Electronic Arts CEO John Riccitiello.
Bono joined Elevation Partners shortly after its formation in 2004, keen to invest in technology and media companies. One of the partners’ first investments was in Forbes Media LLC, the owner of the Forbes magazine brand. Elevation took a 45% stake in Forbes Media for around $264m. According to McNamee, it was Bono who led the way in choosing Forbes Media, explaining that the singer liked Forbes because “it has a point of view”. “[Bono] drove this part of the discussion and likes the fact that there has been a consistent philosophy throughout its history,” he said. Within months, Forbes Media froze employee pensions. As its performance went from bad to worse, Elevation’s stake reduced in value by 90%.
Bono eventually recouped his investment through a sale to international investors in 2014, which says more about the strength of the Forbes brand than anything else. Then came Palm. Palm was a well-established name in the personal digital assistant (PDA) sector, but was struggling to break into the emerging smartphone market. In 2007, Elevation put $325m into the company (its largest investment to date) for a 25% stake, while Palm was working on its own smartphone, the Pre.
Elevation followed this with another $100m investment the following year, reaffirming its confidence in Palm and its new product. In reality, Palm was a shambles, scrambling to update its operating system to provide the performance required for its products to remain competitive. Its management set unrealistic targets and panicked when the software in question failed.
The company managed to fool outsiders, including Elevation, with surface-level glitz, while everything fell apart behind the scenes. The Pre was a disastrous failure, and Palm was sold to HP. Bono managed to just about break even from the deal, but it was enough for Wall Street bloggers to dub him “the worst investor in America”.
Still, Bono’s investment firm made one shrewd move that cancels out these poor decisions. Elevation managed to purchase a 2.3% stake in Facebook in 2009, the year the social network went public. As of September 2015, that stake was worth $1.4bn, which more than makes up for Elevation’s misses. Elevation has gone quiet in recent years, suggesting that the partners have decided to quit while they’re ahead – perhaps the shrewdest move they’ve ever made.
Mark Rowland is the Editor of Accounting Technician.