A special situation: hubris vs. common sense
In 1999, after years of non-stop global travel, Mr. Manoogian joined a colleague who was the CFO at Teligent, a NASDAQ listed fixed wireless telephony provider, headquartered in Northern Virginia. He served as Senior Vice President, Corporate Development. Teligent was seeking help on achieving a sustainable funding and operational plan after a frantic start up during the internet/telecom boom.
Launched in 1996 and led by Alex Mandl, the former president of AT&T, Teligent counted a who's who of investors as shareholders, including Liberty Media, NTT, and Telcom Ventures LLC. The company completed a $500 Million preferred equity investment led by Microsoft in late 1999. Other investors in that offering included Chase Capital Partners, Hicks Muse Tate & Furst, Deutsche Bank Equity Partners, and Olympus Funds.
We include this example not because it represented a successful outcome, but precisely because it didn't. It illustrates the point made earlier about a Special Situation having lost the thread of common sense early on, which made it difficult to render a positive outcome, despite the efforts of some committed and talented people. What occurred with Teligent stands in stark contrast to our approach at P|MB. The Teligent experience continues to color P|MB's judgment; reinforcing key common sense principals at P|MB:
- a pedigree management team or shareholder base alone is not the basis for investment,
- there is no single asset that is a substitute for an executable operating plan,
- management must have a desire to actually operate the business as the means to create value, not simply hold or flip assets,
- you can't spend your way to break even,
- capital structures must reflect an alignment of investor interests to the extent possible, and
- you must have a willingness to say something when the emperor has no clothes.