Rock star venture capital firm Elevation Partners has thrown a $100 million lifeline at Palm indicating that at least a few people have confidence the handset manufacturer can turn its struggling company around. It all hinges on the super-secret Nova smartphone platform Palm is expected to unveil on January 8 at the Consumer Electronics Show.
Regarding the transaction, expected to close January 31, Elevation co-founder Roger McNamee said in a press release, “We believe that Palm is in a position to transform the cell phone industry” and that “Palm has an industry-leading team and an exciting, differentiated product roadmap.” So who knows, maybe Nova will be a hit. I would assume Elevation has more insider knowledge than most given the large investment.
According to the agreement Elevation will invest by purchasing Series C preferred stock convertible into Palm common stock at $3.25 per share. In addition, Elevation will receive “warrants to acquire 7 million shares of Palm common stock at the same price.” Palm also has the option to force Elevation to sell up to $49 million in stock to other investors for the same or better terms before March 31, 2009.
The announcement did wonders for Palm’s share price today. After opening at $2.60, Palm’s share price rose to a high of $3.71 and ultimately closed at $3.05–a 22.49 percent increase for the day.
Elevation Partners co-founder and Managing Director Bono is also the founder and lead singer of uber-band U2. The VC firm previously bought a 27 percent stake in Palm for $325 million in October 2007.