Whew, That Was Close!

These have been busy days for us here at IcebergCarwash, as the blog struggles to remain a viable entity.
I don't wish to cause any undue alarm, but we have some problems.
In Washington-speak, "issues have arisen."

Allow me to explain.
The trouble actually started before the blog went live.
Not content with creating a plain old blog, we realized that we needed to get very big, very quickly.
Toward that end, aided by some eager banker friends, we quickly raised the capital we needed to fund all of our aggressive expansion plans for IcebergCarwash. In all, we borrowed about $10 billion (give or take a couple of hundred million).

Granted, that probably seems like quite a bit of money. It is. Especially in 2007 dollars. However, FBB and I did some financial engineering to reduce our risk. If nothing else, IcebergCarwash is about managing risk. The debt we raised was to be paid back according to a schedule that was based on a complex formula. In a nutshell, the key statistic is Comments-per-post (CPP). As its name implies, this statistic is calculated by dividing all of the comments the blog has received by the aggregate number of posts, yielding an average number of comments per blog.

As long as our CPP remained above 3.0, we would not be obligated to pay any principal or interest on the loan, nor to provide any collateral. However, if our CPP dipped below 3.0, and remained there for a period of 7 days, the entire loan would be repayable, in full, immediately. We'd also be responsible to pay about $500 million in retroactive fees, or 12 million times the 30 day moving average of the volatility index (VIX), whichever is larger. Like I said, this thing is complex.

The CPP target number (3.0) wasn't simply picked at random. We formed a team, comprised of a nice mix of professional investors, academics and bookmakers. Two-thirds of the team members are PhDs. The team performed some analysis, based upon a relatively small, yet statistically representative slice of the Blogosphere, about 12 million sites. We calculated the average CPP for each blog, then plotted the results on a graph. Not surprisingly, the graphical results resembled rather closely the classic bell-shaped curve, denoting a normal distribution. Then, by calculating the mean, and standard deviation, we determined the odds that IcebergCarwash's CPP would fall below 3.0. We then smoothed out the calculation for the "lifecycle effect," taking into account the fact that a blog's CPP is lower in the first few weeks of its existence (introductory phase), rapidly building up to its peak, about 11.5 months in (the ramp-up phase), and flattening out for a period of 9 months (maturity phase), before very slowly declining (mind-numbing boredom phase). We also threw in some qualitative factors, for good measure.

The answer? There was a 0.003167% chance of us falling short of our CPP goal, thereby running into a credit problem. That's what the PhDs told us. In banker's parlance, this was what you'd call "a lay-up."

Needless to say, things haven't gone as planned on the CPP front. As of this morning, the blog contains 25 posts, with a total of 32 comments, or a CPP of 1.28. That's not too good. To put that number in perspective, Qwerishi Astjinogsbitae, a young Kenyan boy who lives in a makeshift tent with his donkey, Chaz, writes a blog entitled "Qwerishi Astjinogsbitae," named for his cousin, with whom he shares a name.

His CPP is 2.33.

I've always been in favor of that whole developing world thing (we need to find more people to purchase our government's bonds; the Asians are pretty well saturated by this point), but this is humiliating. Not to make it personal, but this kid has never so much as seen a toilet in his life, and his CPP is 82% higher than mine.

What I'm saying is, there's no way we could've seen this coming.

At this stage, we could not afford the luxury of wondering what went wrong. Clearly, there were once-in-a-lifetime events, well beyond our - or anyone else's - control, having heretofore unpredictable effects on the global blog markets.

We needed to move on, and figure out how best to deal with our $10,500,000,000 problem. It was time to get busy.

In fact, FBB alluded to this very situation in her previous post ("It's the Destination, Not the Journey..."). As I'm sure all of our readers have figured out by now, that was a brilliant, allegorical post. "Cleaning out the garage" and "sorting out the clothes" are simply metaphors for "fixing up the balance sheet" and "dialing for dollars." Wait a second, those last two are also metaphors, for "putting our house in order" and "keeping our powder dry" and...never mind. You get the point.

We first attempted to sell ourselves to a larger blog. Unfortunately, we didn't receive any worthwhile offers. We might seem desperate, but certain multiples are just flat-out insulting. This is not a fire sale.

We then approached the government, seeking some short-to-intermediate-term intervention on their part. Let me be clear: We were not seeking a bailout. Only losers get bailed out. IcebergCarwash is cool.

We made the case that IcebergCarwash's failure would not be an isolated incident. Things are very interconnected on this Internet thing. Hence, the frequent use of the word "link." A failure of IcebergCarwash would likely set off a catastrophic chain of events which would result in the failure of an untold number of other blogs, including ones that are favorably inclined toward the President and his administration. Maybe all three of those blogs.

Unfortunately, the government was not swayed. Even when we offered them warrants convertible into as much as 79.9% of IcebergCarwash's equity.

Undeterred, we lobbied the government to give us permission to re-establish the blog as a bank holding company, as they did over the weekend for Goldman Sachs and Morgan Stanley. This would allow us to take "deposits" from our readers, in order to shore up our capital base. No dice.

Finally, at the 11th hour, we were able to come up with an agreement which could stay the blog's execution for a while. In exchange for our acceptance of certain restrictive spending covenants, we were given another 90 days to show a significant increase in our CPP. From time-to-time, we will calculate and publish our CPP, in order to keep everyone updated.

So, the good news is, IcebergCarwash has dodged a bullet, for now.
The bad news is, we'll probably have to forget about those free T-shirts for a while.
And the Super Bowl ad.