The New Class of Billionaires
by Robert Frank
Giant initial public offerings and a surge in mergers and acquisitions are spawning a new generation of billionaires and millionaires.
The eight biggest global IPOs launched since January have a combined corporate value of $75 billion, according to Dealogic, creating billions of dollars in wealth for company founders.
Even on its own, the initial public offering of Glencore International AG will likely create six billionaires, marking the start of a new global wealth boom driven by rising financial markets and tech-sector euphoria.
The new generation of the ultrawealthy includes a Swiss medical-device tycoon and a California surfer who netted $60 million from the sale of his clothing company.
The deals and IPOs mark the official return of the "liquidity event"—a one-time windfall of cash that rains down on company founders or shareholders when they sell their stake. Liquidity events were common during the dot-com bubble of the late 1990s and the real-estate boom of the 2000s, when dot-com founders like Steve Case of AOL Inc. (NYSE: AOL - News) or later mortgage giants like Herbert and Marion Sandler cashed out of their companies for billions.
After the 2008 financial crisis, however, big liquidity events largely evaporated. While the latest wave is highly concentrated among a handful of social-networking and commodity companies, it's likely to spread to other industries as long as financial markets and economies continue to strengthen.
"The liquidity event is back, especially for these emerging technology companies," said George Walper, president of The Spectrem Group, a wealth research firm. "The question is whether it will broaden to cover more main street firms and brick-and-mortar entrepreneurs like we saw in the 2000s. It may take years for that to happen."
Much of the wealth creation is overseas. This week's public offering disclosures from Glencore, the Swiss commodity trading firm, valued the holdings of six of the firm's shareholders at as much as $23 billion. Chief Executive Officer Ivan Glasenberg's 15.8% stake is potentially worth $9.5 billion.
This week's IPO of Renren Inc. (NYSE: RENN - News), the China social-networking site, gave founder and CEO Joe Chen a net worth of more than $1 billion.
Such paper wealth may prove as ephemeral as the bull market. During the dot-com boom of the late 1990s and early 2000s, companies like online grocery shopping service Webvan Group Inc. raised millions from IPOs, but quickly crashed because of falling markets and failed business strategies. They typically had high costs and low profits instead of the other way around. Webvan was valued at more than $1 billion at its peak, but was later forced to close.
In the U.S., technology companies are restarting the wealth engine, especially consumer Web companies. In a sign that today's dot-com euphoria and flood of investment money may exceed the late 1990s, the founders are becoming paper billionaires even before an IPO or sale. Facebook Inc., Zynga Inc., Twitter Inc. and Groupon Inc. have all yet to go public, but their combined value from private investments and other deals now exceeds $75 billion.
Mark Zuckerberg leads the pack with a notional net worth of more than $12 billion. The company remains private and is expected to go public as early as next year. A private investment in the company by a group of investors including Goldman Sachs valued the company at $50 billion, making Mr. Zuckerberg's 24% stake worth more than $12 billion. Some investors have purchased shares on the private market that value the company at $70 billion.
Twitter late last year raised private money that valued the firm at $3.7 billion, giving the three founders paper wealth totaling hundreds of millions of dollars. Groupon, the discount deals business, has held talks that would value the firm as high as $25 billion.
Mark Pincus, CEO of online game developer Zynga, may also be on the way to becoming a billionaire. Recent investments in the company value the firm as high as $10 billion.
Some nontech entrepreneurs are also cashing in. Johnson & Johnson's (NYSE: JNJ - News) deal to buy medical-equipment maker Synthes for more than $21 billion netted founder Hansjörg Wyss more than $10 billion from his 47% stake.
French luxury-group PPR's deal to buy California surf-and-skate brand Volcom Inc. for $607.5 million represented a 37% premium and netted $60 million for CEO Richard R. Woolcott, the 45-year-old California surfer who co-founded the company. The company's motto is "Youth Against Establishment."
Write to Robert Frank at robert.frank@wsj.com
Giant initial public offerings and a surge in mergers and acquisitions are spawning a new generation of billionaires and millionaires.
The eight biggest global IPOs launched since January have a combined corporate value of $75 billion, according to Dealogic, creating billions of dollars in wealth for company founders.
Even on its own, the initial public offering of Glencore International AG will likely create six billionaires, marking the start of a new global wealth boom driven by rising financial markets and tech-sector euphoria.
The new generation of the ultrawealthy includes a Swiss medical-device tycoon and a California surfer who netted $60 million from the sale of his clothing company.
The deals and IPOs mark the official return of the "liquidity event"—a one-time windfall of cash that rains down on company founders or shareholders when they sell their stake. Liquidity events were common during the dot-com bubble of the late 1990s and the real-estate boom of the 2000s, when dot-com founders like Steve Case of AOL Inc. (NYSE: AOL - News) or later mortgage giants like Herbert and Marion Sandler cashed out of their companies for billions.
After the 2008 financial crisis, however, big liquidity events largely evaporated. While the latest wave is highly concentrated among a handful of social-networking and commodity companies, it's likely to spread to other industries as long as financial markets and economies continue to strengthen.
"The liquidity event is back, especially for these emerging technology companies," said George Walper, president of The Spectrem Group, a wealth research firm. "The question is whether it will broaden to cover more main street firms and brick-and-mortar entrepreneurs like we saw in the 2000s. It may take years for that to happen."
Much of the wealth creation is overseas. This week's public offering disclosures from Glencore, the Swiss commodity trading firm, valued the holdings of six of the firm's shareholders at as much as $23 billion. Chief Executive Officer Ivan Glasenberg's 15.8% stake is potentially worth $9.5 billion.
This week's IPO of Renren Inc. (NYSE: RENN - News), the China social-networking site, gave founder and CEO Joe Chen a net worth of more than $1 billion.
Such paper wealth may prove as ephemeral as the bull market. During the dot-com boom of the late 1990s and early 2000s, companies like online grocery shopping service Webvan Group Inc. raised millions from IPOs, but quickly crashed because of falling markets and failed business strategies. They typically had high costs and low profits instead of the other way around. Webvan was valued at more than $1 billion at its peak, but was later forced to close.
In the U.S., technology companies are restarting the wealth engine, especially consumer Web companies. In a sign that today's dot-com euphoria and flood of investment money may exceed the late 1990s, the founders are becoming paper billionaires even before an IPO or sale. Facebook Inc., Zynga Inc., Twitter Inc. and Groupon Inc. have all yet to go public, but their combined value from private investments and other deals now exceeds $75 billion.
Mark Zuckerberg leads the pack with a notional net worth of more than $12 billion. The company remains private and is expected to go public as early as next year. A private investment in the company by a group of investors including Goldman Sachs valued the company at $50 billion, making Mr. Zuckerberg's 24% stake worth more than $12 billion. Some investors have purchased shares on the private market that value the company at $70 billion.
Twitter late last year raised private money that valued the firm at $3.7 billion, giving the three founders paper wealth totaling hundreds of millions of dollars. Groupon, the discount deals business, has held talks that would value the firm as high as $25 billion.
Mark Pincus, CEO of online game developer Zynga, may also be on the way to becoming a billionaire. Recent investments in the company value the firm as high as $10 billion.
Some nontech entrepreneurs are also cashing in. Johnson & Johnson's (NYSE: JNJ - News) deal to buy medical-equipment maker Synthes for more than $21 billion netted founder Hansjörg Wyss more than $10 billion from his 47% stake.
French luxury-group PPR's deal to buy California surf-and-skate brand Volcom Inc. for $607.5 million represented a 37% premium and netted $60 million for CEO Richard R. Woolcott, the 45-year-old California surfer who co-founded the company. The company's motto is "Youth Against Establishment."
Write to Robert Frank at robert.frank@wsj.com
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