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I understand there is a difference between cashflow and assets on a balance sheet but how can a company worth $1bn go bankrupt? Does bankruptcy means something
by throwawayReply 10y ago
I understand there is a difference between cashflow and assets on a balance sheet but how can a company worth $1bn go bankrupt?
Does bankruptcy means something other than insolvent? Is liquidation or receivership a more accurate term?
Otherwise you would think a bank would lend enough cash to keep the lights on.
- godzillabrennus 10y agoLending from traditional institutions requires a business model that has profitability in its future. Most of these VC backed companies are high risk so even if a few VC funds get together and label a business at $1B in valuation that doesn't mean traditional businesses will.
- bane 10y agoStep 1) Start a company that makes flurbles. Step 2) I invest in a billionth of your company for $1. Step 3) Your company is now valued at a billion dollars. Step 4) Hire an employee Step 5) Try to make payroll with that $1 Congratulations, your company is now an insolvent unicorn. The reality is only slightly more complex, but not much.
- jmspring 10y agonext gen underpants gnome logic
- georgeecollins 10y agoA valuation is not cashflow or assets, it is the value of all the shares of the stock of the company. Assets and cashflow can change, but valuation can change even faster (and be more easily gamed) because it is based on the latest price people are willing to pay for shares of the company.