As a musician, U2’s Bono is rock royalty. He was inducted to the Rock and Roll hall of Fame with bandmates in 2005, the group is the most-decorated act in Grammy history with 22 total awards, and U2’s total record sales top more than 145 million copies worldwide. But as an investor, Bono could rank as one of the worst Wall Street wannabes of all time.
Case in point: Bono not only lost his shirt buying a huge stake in Palm Inc. (PALM), but he also helped the stock’s tumble!
First, the backstory: Bono founded Elevation Partners in 2004, naming the fledgling firm after a hit from the songwriter’s 2000 album All That You Can’t Leave Behind. At the helm with him included Former managing director at Apple (AAPL) Fred Anderson and Electronic Arts (ERTS) CEO John Riccitiello, among others. The mission of Elevation Partners is stated as “investing in intellectual property and content oriented businesses, as well as traditional media and entertainment companies, where we can partner with management to enhance growth and profitability.”
In June 2007, Elevation Partners invested a whopping $325 million for a 25% ownership stake in Palm (PALM) — then in late 2008, it followed up with an additional $100 million equity investment! In 2007 PALM shares were over $9 a piece, but now are fighting to hang on to the $4 mark.
Losing more than half your investment in a stock is horrible, but not unheard of on Wall Street. What’s so shocking is that Bono would have made that move after Apple Inc. ’s (AAPL) Steve Jobs formally unveiled his iPhone plans six months earlier after months of rampant rumor and speculation of the gadget. Even more stunning is that the iPhone hit the market within days of Bono’s buy-in to Palm!
Sure, maybe Bono couldn’t believe the iPhone would be such a hit. But as an investor, wouldn’t you want to wait and see the numbers?
That’s a damning enough move, but perhaps the silliest part of Bono’s Palm investment was how he allowed U2 to partner with the not-so-smartphone company’s key competitor Research in Motion (RIMM). BlackBerry was a key sponsor of U2’s “360 degrees” tour in 2009. When the tour kicked off on June 30, 2009, PALM shares were at $16.58 — more than four times their current value! The tour is scheduled to end in October of 2010, and Palm could very well be bankrupt by then.
Now Palm has had much bigger problems than U2 sponsoring a rival — namely low popularity among consumers thanks to widespread appeal of the iPhone and the upstart Android smartphone operating system from Google (GOOG). But the bonehead conflict of interest speaks volumes about the bad business decisions Bono is capable of.
Since Elevation is a private firm, there’s no way to know just how poorly the company has fared. But the firm is estimated to have a little less than $2 billion under management by some sources. That’s a lot of cash to play with — and undoubtedly will result in some more bad investments in the years ahead.
On the bright side, it’s probably comforting to regular investors to see such a high profile name make such poor decisions with his money. Bono certainly can afford to lose it, and better him than a small-time trader planning for retirement.