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"By raising debt rather than equity, it doesn’t have to worry about poor signaling from a down-round raised at a lower valuation than the $8.5 billion it set in
by andyjohnson0 11y ago
"By raising debt rather than equity, it doesn’t have to worry about poor signaling from a down-round raised at a lower valuation than the $8.5 billion it set in June 2015."
Anyone care to explain what this means?
- nostalgiac 11y agoIf they raised it as equity, they would have to give away a percentage of the company - which gives a 'valuation' to it. So, if they raised $1B for 10% equity, the valuation of the company's worth would be $10B. To avoid this hassle entirely, they raised it as 'debt'. The reason being, if they had to give away more than 8.5% of the company for the $1B, the company's valuation would have gone 'down' which can give off a bad vibe/look.
- andyjohnson0 11y agoThank you! So, "down-round" == reduced valuation, and "poor signalling" == consequent bad vibe?