Isegoria

For passengers on Skybus debut, it’s all about the price:

While other US airlines have been trimming frills and edging into a-la-carte pricing for once-free services like checked baggage and extra legroom seats, Skybus takes frugality to new levels. The airline promises at least 10 $10 fares on every flight — although by Tuesday afternoon those were all gone for June and July on the Portsmouth-Columbus route. Skybus’s website offered only $30 to $150 one-way tickets, which were still significantly less expensive than other airlines.

All any of the Skybus tickets buy, though, is a seat on the plane. Passengers have to pay $5 to check a bag, $8 for a blanket, $15 for a pillow, and $10 to wait at the front of the line, since there are no assigned seats. Except for babies and people with medical needs, passengers are forbidden to bring food or drink on board so Skybus squelches any free competition for its $5 Budweisers and $10 meat loaf plates.

There are no movies. And by eliminating first-class seating, it squeezes 144 coach seats on a model of plane that has 124 or 126 seats in two classes on most other carriers — although Skybus’s 30-inch coach ‘‘seat pitch,’’ or spacing between seats, is the same as Northwest Airlines and US Airways in coach.

Also holding down costs: There is no phone number customers can call. All tickets are sold online, and the only access to Skybus customer service is the gate agent at the airport. One big revenue stream for the airline is making its jets flying billboards for Nationwide Insurance, which pays an undisclosed fee to get its name and website on the fuselage and inside the cabin.

Goldman Takes ‘Private’ Equity to a New Level:

The new system, GS TRuE — short for Goldman Sachs Tradable Unregistered Equity — was announced two weeks ago and made its debut on Monday with an $880 million sale of a 15% stake in Oaktree Capital Management LLC, an alternative-investment manager.

It is the first of several new, private exchanges like these being considered by Wall Street firms and others. Nasdaq is also planning its own new market for smaller, unregistered securities.

These markets will generally be closed to individual investors. For instance, Goldman’s market is open only to large institutional investors with assets of more than $100 million. That is because the stocks traded on GS TRuE aren’t registered with the Securities and Exchange Commission and issuers aren’t subject to SEC regulations designed to protect individual investors.

It represents the latest step in the creeping exclusion of individual investors from a growing proportion of financial-market activity. [...] Although the Oaktree offering was sold to only about 50 buyers, it traded at roughly the same multiple of expected 2008 earnings as Fortress Investment Group LLC, a comparable alternative-investment manager that recently sold stock in a conventional initial public offering, according to Wall Street traders.

In other words, the Oaktree stock traded without a price discount that would reflect the lack of a public market with multiple dealers. In that respect, the new market passed an important first test. If stocks traded at too much of a discount, that might dissuade other companies from listing there.
[...]
Goldman executives said one reason they launched their own system solo, without asking other rival securities firms to participate, was to insure control over the number of investors in any particular security. That is crucial, they said, because any company that goes over 499 investors must register as a public company.

That 499-investor limit, said one executive of a top private-equity firm, is one reason why such buyout firms aren’t likely to rush pell-mell into this type of new issue for their portfolio companies. The buyout firms want to attract far more investors to make sure they get the best prices for their stock, he explained.

Will this convince regulators to ease up on public companies — or to tighten up on private companies?

India grows up as labor arbitrage runs its course:

Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first 5 years of his career to get from 1% to 10% of his equivalent US counterpart. He then jumped from 10% to 20% of his US counterpart in the next 1 year. During his time with us (less than 2 years) he jumped to 55% of the US wage. In the next few months we would have had to move him to 75% just to “keep him at market.”

What does this mean?

However, this huge run up in the wages has destroyed the ROI I referred to earlier. So today we decided to consolidate all of our engineering and research efforts back to our HQ in California.