Negative enterprise value – A buying opportunity for VC-backed startups?

Check this out.  Transmeta, once a high-flier in the low-power processor space was purchased by a venture-backed company called Novafora.

Novafora hadn’t raised enough money to afford the $250 million+ purchase price (a price tag not many venture backed startups could afford), but was able to purchase the company (pending approvals and resolution of a class action suit) for virtually zero dollars because the market cap of the company was basically equal to the cash and short-term securities on the balance sheet!

I thought this was an isolated situaton but if you look at many small cap stocks on the market right now, you’ll see that there are other firms that also have a zero (or negative) enterprise value.

My gut tells me this is only the first of what will be many attempts by venture-backed companies to consolidate by purchasing relevant zero (or low) enterprise value companies.

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