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They're not too clear on the mechanics of this deal. Previous investors get diluted in a down round, but not usually to zero (especially given liquidation prefe

They're not too clear on the mechanics of this deal. Previous investors get diluted in a down round, but not usually to zero (especially given liquidation preferences, etc.). But: > If Birchbox’s venture investors had fought the deal — which they could have done as debt holders who gave the company a lifeline in 2016 — the company and its employees could have been staring down bankruptcy. https://www.recode.net/2018/5/1/17305940/birchbox-recap-viking-global-qvc-merger-sale https://www.recode.net/2018/5/1/17305940/birchbox-recap-viki... So maybe they're saying that Birchbox's earlier investors accepted a deal where their equity became worthless, to preserve the value of their debt? Or maybe the "nothing" isn't strictly correct, and they just mean it's highly dilutive?

mirimir 8y ago
To me, "nothing" implies no equity and no debt owed. So maybe they could have forced Birchbox into bankruptcy, but would have gained nothing except bad will. Or could there be tax implications?
- tripletao 8y ago
  From the facts reported, I don't see how they could come away with worthless equity and worthless debt. Whatever the tax implications, their liability should be limited--they could win the thing at the bankruptcy auction for $1, and then turn off all the lights and go home, only $1 poorer. So if someone wants to inject new money and keep running the business, then they should at least get some hostage value. Maybe Birchbox has enough trade creditors with claims senior to the investors' debt to somehow wipe them out? That sounds pretty weird, though. If only all financial journalists were trained as securities lawyers...
  - mirimir 8y ago
    I'm glad that I'm not the only one puzzled by this. But as I said, I'm naive.
ealexhudson 8y ago
It's being reported in a few places as an acquisition as opposed to an equity investment per se - Viking may be purchasing the positions of the previous investors, and probably doing it for very little. There was some venture debt on the books, so potentially they're doing a deal to repay that debt, rather than have Birchbox default on it?

mirimir 8y ago

To me, "nothing" implies no equity and no debt owed. So maybe they could have forced Birchbox into bankruptcy, but would have gained nothing except bad will. Or could there be tax implications?

tripletao 8y ago
From the facts reported, I don't see how they could come away with worthless equity and worthless debt. Whatever the tax implications, their liability should be limited--they could win the thing at the bankruptcy auction for $1, and then turn off all the lights and go home, only $1 poorer. So if someone wants to inject new money and keep running the business, then they should at least get some hostage value. Maybe Birchbox has enough trade creditors with claims senior to the investors' debt to somehow wipe them out? That sounds pretty weird, though. If only all financial journalists were trained as securities lawyers...
- mirimir 8y ago
  I'm glad that I'm not the only one puzzled by this. But as I said, I'm naive.

ealexhudson 8y ago

It's being reported in a few places as an acquisition as opposed to an equity investment per se - Viking may be purchasing the positions of the previous investors, and probably doing it for very little. There was some venture debt on the books, so potentially they're doing a deal to repay that debt, rather than have Birchbox default on it?