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Gilt’s Unicorn Tale Comes to an End After Being Acquired for $250M

86 points by ssclafani 11y ago

gcb0 11y ago
"unicorns" are only interesting for Goldman Sachs and the like for the possibility of a inflated IPO. btw, did Facebook deliver any dividends?
- hkmurakami 11y ago
  FB has never issued dividends to common stock holders. http://m.nasdaq.com/symbol/fb/dividend-history http://m.nasdaq.com/symbol/fb/dividend-history
  - gcb0 11y ago
    hence my point. this is only to lure people into stock-betting, a zero sum game where the earlier people to join have a great advantage.
    - geofft 11y ago
      There is value in a non-dividend paying stock beyond the stock market itself: ideally, the market cap estimates the value of the company if it were to be acquired, and someone buys your shares from you. So it's not simply stock market participants guessing about other stock market participants. There is an actual, valuable, buyable product being traded, namely the company itself; it just happens to be traded in the form of lots of tiny shares. Whether the chance of an acquisition happening is sufficiently non-nil as to be worth caring about is a legitimate question. It's not completely unheard of even for tech companies (cf. Dell), but it's certainly not the norm. Also, note that the stock market isn't zero-sum: when the value of a stock goes up, wealth is created. Nothing goes down. If a company IPOs at $10/share, I buy it at $12, and that share gets purchased for $14, nobody loses money. The original purchaser of the share made $2, I made $2, and the final owner now owns a product which the market thinks is worth paying $14 for. There may be another sense in which this activity is meaningless, but it's not because it's zero-sum.
      - AznHisoka 11y ago
        Keyword here is "ideally". Stocks are just a very elaborate pyramid scheme in which you rely on a greater fool to buy your stock at a higher price. It has nothing to do with owning a share of a company unless you get paid dividends. Plus what are the chances Google or Apple getting acquired? Once you go public that rarely happens.
        arethuza 11y ago
        Google and Apple are exceptional though - there are a lot of public companies and acquisitions of them happen all the time.
        lmm 11y ago
        Buybacks are functionally equivalent to dividends, and more tax-efficient (which is a whole other discussion). If a company's doing buybacks you're benefiting appropriately from your ownership share. Both Google and Apple have now started paying dividends (Google has done it via the funky reverse-spinout of Alphabet, but again that's economically identical).
        geofft 11y ago
        Dell actually got acquired very recently. Google did the weird Alphabet thing. Apple had the entire NeXT saga. It's not likely to happen soon, but unless you're a "fool" or someone who makes their money on foolishness arbitrage (which, again, you can do without being zero-sum), that's not the point of stocks, anyway. Buy a bunch and leave it alone until you retire.
throwawaythat1 11y ago
This is OT but how come submissions which have less than 12 points appear on the first page? Has anyone figured out the HN algo? There are many other posts with far greater points yet this appears. Maybe techcrunch has higher ratings?
- bcassedy 11y ago
  Notably, the user that posted the article has 47,000+ karma. I imagine that's a factor
  - aaronbrethorst 11y ago
    Speaking as a user with 37,000+ karma, no, not that I am aware of.
- hkmurakami 11y ago
  It has a time decaying value function. If the points accumulate rapidly upon submission, you can reach front page with as few as 5 up votes. This often happens for github repo submissions.
  - ssclafani 11y ago
    This is the correct answer.
  - tamana 11y ago
    Does it stay on the front page with so few votes? This sounds trivially gameable by voting rings.
    - deleted 11y ago
      [deleted]
    - adventured 11y ago
      No, it'll melt and quickly fall off the front page if it doesn't get more votes in an appropriate amount of time. It's not trivial to game over time. HN has been very successfully handling attempts at gaming for years. If it didn't, the site wouldn't function at all given its traffic, it would be overwhelmed with crap 24/7.
spaceflunky 11y ago
$271MM in investment and a $250MM purchase price. https://www.crunchbase.com/organization/gilt-groupe#/entity https://www.crunchbase.com/organization/gilt-groupe#/entity Does that mean that the investors got all the money and anyone holding common stock was basically screwed?
- hkmurakami 11y ago
  Yes. The preferred will get the payout. If there were any holders of debt (which is senior to preferred -- his is why the yield on preferred shares of mega corps are higher Than the company's bonds), they will get paid before the preferred. Execs will renegotiate their compensation contracts with the acquirer and likely have fairly lucrative contracts (often happens to sweeten the deal).
  - harlanlewis 11y ago
    There may be a carveout in place, providing a modest return that would otherwise be consumed entirely by investors eating first. http://blog.drosenassoc.com/?p=70 http://blog.drosenassoc.com/?p=70
  - tacoss 11y ago
    It's not so much to "sweeten the deal" as it is to make sure the execs don't flee, leaving the acquirer with an organization that they have no idea how to run.
- nikcub 11y ago
  A 1x liquidity preference is standard, but it is common now to see larger multiples - especially in high-value later stage rounds, where the preference to those investors would also be stacked before earlier investors. So, yes, I doubt common holders got much here, it is also possible that earlier investors didn't get much either. For founders and employees this is usually made up with a separate bonus or earn-out from the acquiring company - which has been the source of conflict of interest claims from investors in some of these deals (where the acquisition price is much less than the 1x preference but the founders get a separate payout/earnout/signing bonus).
ojbyrne 11y ago
Rumors seem like One King's Lane is going to follow suit: http://recode.net/2016/01/06/one-kings-lane-once-valued-at-900-million-is-likely-to-sell-for-fraction-of-that/ http://recode.net/2016/01/06/one-kings-lane-once-valued-at-9... Lots of unicorn blood to be spilled.
colmvp 11y ago
It already makes me feel a bit old to remember the days when Gilt, Fab, LivingSocial, and Groupon were all riding hot as variants of discount deals and but one by one have fallen from grace.
- adventured 11y ago
  Back in the 1990s, people seemed to constantly talk about "Internet time." Referring to the sense that a year online, seemed like forever - especially given most people had spent very little time online, the Web was expanding at a rate essentially never seen before, there was little to compare it to historically, it all seemed to change a lot in one year. It still sometimes feels like the Internet time effect, when you refer to the brief era of Groupon's boom - it seems like it was a decade or more ago, when it was just three to four years.
SatoshiRoberts 11y ago
Amazon has such a commanding lead over everyone in ecommerce, it's going to take more than scale to beat them out.
- adventured 11y ago
  Amazon has merely a slice of ecommerce. They have a commanding lead only in their type of ecommerce: being the new age Walmart of the Web. That leaves room for the other 80% of the market (in Walmart's case, they couldn't dominate most categories eg: dollar stores, Target, Costco, Home Depot, paint stores, convenience stores + gasoline, banking, pharmacy, clothing, tens of thousands of boutiques, grocery stores, Macy's & upscale, jewelry, video games, electronics, liquor stores, and on and on). You have to do what Amazon isn't doing. Ultimately as ecommerce doubles in size in the US over the next ten years, Amazon is not going to get most of that. It's a staggering opportunity in terms of scale. They couldn't beat eBay at auctions. They couldn't beat Craigslist at classifieds. They can't beat Priceline or AirBnB. They couldn't beat Google at search. They couldn't beat Apple at phones. They won't own online restaurant ordering. They will probably fail at trying to own services (Angie's List, legal, health, whatever). Amazon is going to lose in most things not directly tied to what they do today. Amazon's inability to dominate the other 80% of ecommerce, is your opportunity.
SatoshiRoberts 11y ago
JustFab is on the cutting block too
stephenboyd 11y ago
They were purchased by Hudson's Bay Company, which was founded in 1670. It almost seems anachronistic to see a historical institution from the 17th century buy up a hyped tech company. TechCrunch's front page headline for this is "Gilt Gets Acquired For $250M by Saks Fifth," which wouldn't be as interesting and isn't even accurate since Saks is just another HBC subsidiary. This is like if the East India Company bought Groupon.
- Animats 11y ago
  Well, what really happened is that NRDC Equity Partners, formerly National Realty & Development Corp, a mall developer, did a sequence of deals. These resulted in them owning Saks, Macys, Lord and Taylor, and Hudsons Bay. After a few reverse mergers, Hudsons Bay became the parent company. NRDC's business is buying troubled retailers and turning them around. They're surprisingly good at it.[1] [1] http://business.financialpost.com/executive/management-hr/how-richard-baker-engineered-hudsons-bay-co-s-stunning-turnaround-with-a-leap-of-faith-in-real-estate http://business.financialpost.com/executive/management-hr/ho...
  - deleted 11y ago
    [deleted]
techterrier 11y ago
Can't say I'm shocked. Everything I've been interested in buying from Gilt I could find cheaper elsewhere just by googling.

86 points by ssclafani 11y ago

gcb0 11y ago

"unicorns" are only interesting for Goldman Sachs and the like for the possibility of a inflated IPO. btw, did Facebook deliver any dividends?

hkmurakami 11y ago
FB has never issued dividends to common stock holders. http://m.nasdaq.com/symbol/fb/dividend-history http://m.nasdaq.com/symbol/fb/dividend-history
- gcb0 11y ago
  hence my point. this is only to lure people into stock-betting, a zero sum game where the earlier people to join have a great advantage.
  - geofft 11y ago
    There is value in a non-dividend paying stock beyond the stock market itself: ideally, the market cap estimates the value of the company if it were to be acquired, and someone buys your shares from you. So it's not simply stock market participants guessing about other stock market participants. There is an actual, valuable, buyable product being traded, namely the company itself; it just happens to be traded in the form of lots of tiny shares. Whether the chance of an acquisition happening is sufficiently non-nil as to be worth caring about is a legitimate question. It's not completely unheard of even for tech companies (cf. Dell), but it's certainly not the norm. Also, note that the stock market isn't zero-sum: when the value of a stock goes up, wealth is created. Nothing goes down. If a company IPOs at $10/share, I buy it at $12, and that share gets purchased for $14, nobody loses money. The original purchaser of the share made $2, I made $2, and the final owner now owns a product which the market thinks is worth paying $14 for. There may be another sense in which this activity is meaningless, but it's not because it's zero-sum.
    - AznHisoka 11y ago
      Keyword here is "ideally". Stocks are just a very elaborate pyramid scheme in which you rely on a greater fool to buy your stock at a higher price. It has nothing to do with owning a share of a company unless you get paid dividends. Plus what are the chances Google or Apple getting acquired? Once you go public that rarely happens.
      - arethuza 11y ago
        Google and Apple are exceptional though - there are a lot of public companies and acquisitions of them happen all the time.
      - lmm 11y ago
        Buybacks are functionally equivalent to dividends, and more tax-efficient (which is a whole other discussion). If a company's doing buybacks you're benefiting appropriately from your ownership share. Both Google and Apple have now started paying dividends (Google has done it via the funky reverse-spinout of Alphabet, but again that's economically identical).
      - geofft 11y ago
        Dell actually got acquired very recently. Google did the weird Alphabet thing. Apple had the entire NeXT saga. It's not likely to happen soon, but unless you're a "fool" or someone who makes their money on foolishness arbitrage (which, again, you can do without being zero-sum), that's not the point of stocks, anyway. Buy a bunch and leave it alone until you retire.

throwawaythat1 11y ago

This is OT but how come submissions which have less than 12 points appear on the first page? Has anyone figured out the HN algo? There are many other posts with far greater points yet this appears. Maybe techcrunch has higher ratings?

bcassedy 11y ago
Notably, the user that posted the article has 47,000+ karma. I imagine that's a factor
- aaronbrethorst 11y ago
  Speaking as a user with 37,000+ karma, no, not that I am aware of.
hkmurakami 11y ago
It has a time decaying value function. If the points accumulate rapidly upon submission, you can reach front page with as few as 5 up votes. This often happens for github repo submissions.
- ssclafani 11y ago
  This is the correct answer.
- tamana 11y ago
  Does it stay on the front page with so few votes? This sounds trivially gameable by voting rings.
  - deleted 11y ago
    [deleted]
  - adventured 11y ago
    No, it'll melt and quickly fall off the front page if it doesn't get more votes in an appropriate amount of time. It's not trivial to game over time. HN has been very successfully handling attempts at gaming for years. If it didn't, the site wouldn't function at all given its traffic, it would be overwhelmed with crap 24/7.

spaceflunky 11y ago

$271MM in investment and a $250MM purchase price. https://www.crunchbase.com/organization/gilt-groupe#/entity https://www.crunchbase.com/organization/gilt-groupe#/entity Does that mean that the investors got all the money and anyone holding common stock was basically screwed?

hkmurakami 11y ago
Yes. The preferred will get the payout. If there were any holders of debt (which is senior to preferred -- his is why the yield on preferred shares of mega corps are higher Than the company's bonds), they will get paid before the preferred. Execs will renegotiate their compensation contracts with the acquirer and likely have fairly lucrative contracts (often happens to sweeten the deal).
- harlanlewis 11y ago
  There may be a carveout in place, providing a modest return that would otherwise be consumed entirely by investors eating first. http://blog.drosenassoc.com/?p=70 http://blog.drosenassoc.com/?p=70
- tacoss 11y ago
  It's not so much to "sweeten the deal" as it is to make sure the execs don't flee, leaving the acquirer with an organization that they have no idea how to run.
nikcub 11y ago
A 1x liquidity preference is standard, but it is common now to see larger multiples - especially in high-value later stage rounds, where the preference to those investors would also be stacked before earlier investors. So, yes, I doubt common holders got much here, it is also possible that earlier investors didn't get much either. For founders and employees this is usually made up with a separate bonus or earn-out from the acquiring company - which has been the source of conflict of interest claims from investors in some of these deals (where the acquisition price is much less than the 1x preference but the founders get a separate payout/earnout/signing bonus).

ojbyrne 11y ago

Rumors seem like One King's Lane is going to follow suit: http://recode.net/2016/01/06/one-kings-lane-once-valued-at-900-million-is-likely-to-sell-for-fraction-of-that/ http://recode.net/2016/01/06/one-kings-lane-once-valued-at-9... Lots of unicorn blood to be spilled.

colmvp 11y ago

It already makes me feel a bit old to remember the days when Gilt, Fab, LivingSocial, and Groupon were all riding hot as variants of discount deals and but one by one have fallen from grace.

adventured 11y ago
Back in the 1990s, people seemed to constantly talk about "Internet time." Referring to the sense that a year online, seemed like forever - especially given most people had spent very little time online, the Web was expanding at a rate essentially never seen before, there was little to compare it to historically, it all seemed to change a lot in one year. It still sometimes feels like the Internet time effect, when you refer to the brief era of Groupon's boom - it seems like it was a decade or more ago, when it was just three to four years.

SatoshiRoberts 11y ago

Amazon has such a commanding lead over everyone in ecommerce, it's going to take more than scale to beat them out.

adventured 11y ago
Amazon has merely a slice of ecommerce. They have a commanding lead only in their type of ecommerce: being the new age Walmart of the Web. That leaves room for the other 80% of the market (in Walmart's case, they couldn't dominate most categories eg: dollar stores, Target, Costco, Home Depot, paint stores, convenience stores + gasoline, banking, pharmacy, clothing, tens of thousands of boutiques, grocery stores, Macy's & upscale, jewelry, video games, electronics, liquor stores, and on and on). You have to do what Amazon isn't doing. Ultimately as ecommerce doubles in size in the US over the next ten years, Amazon is not going to get most of that. It's a staggering opportunity in terms of scale. They couldn't beat eBay at auctions. They couldn't beat Craigslist at classifieds. They can't beat Priceline or AirBnB. They couldn't beat Google at search. They couldn't beat Apple at phones. They won't own online restaurant ordering. They will probably fail at trying to own services (Angie's List, legal, health, whatever). Amazon is going to lose in most things not directly tied to what they do today. Amazon's inability to dominate the other 80% of ecommerce, is your opportunity.

SatoshiRoberts 11y ago

JustFab is on the cutting block too

stephenboyd 11y ago

They were purchased by Hudson's Bay Company, which was founded in 1670. It almost seems anachronistic to see a historical institution from the 17th century buy up a hyped tech company. TechCrunch's front page headline for this is "Gilt Gets Acquired For $250M by Saks Fifth," which wouldn't be as interesting and isn't even accurate since Saks is just another HBC subsidiary. This is like if the East India Company bought Groupon.

Animats 11y ago
Well, what really happened is that NRDC Equity Partners, formerly National Realty & Development Corp, a mall developer, did a sequence of deals. These resulted in them owning Saks, Macys, Lord and Taylor, and Hudsons Bay. After a few reverse mergers, Hudsons Bay became the parent company. NRDC's business is buying troubled retailers and turning them around. They're surprisingly good at it.[1] [1] http://business.financialpost.com/executive/management-hr/how-richard-baker-engineered-hudsons-bay-co-s-stunning-turnaround-with-a-leap-of-faith-in-real-estate http://business.financialpost.com/executive/management-hr/ho...
- deleted 11y ago
  [deleted]

techterrier 11y ago

Can't say I'm shocked. Everything I've been interested in buying from Gilt I could find cheaper elsewhere just by googling.