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They had contracts that they took on when they acquired the company. Twitter are now legally liable for these contracts, I won't be at all surprised if someone
by chris_wot 8y ago
They had contracts that they took on when they acquired the company. Twitter are now legally liable for these contracts, I won't be at all surprised if someone sues them. And frankly, they would be in the right.
What an absolute debacle. This doesn't bode well for the entire Twitter platform.
- x0x0 8y agoOften not. I went through an acquisition of an unsuccessful company. My employer created a shell which is what was acquired. The old corporation wasn't acquired and existed as an independent entity to wind down contracts / deal with the acquisition hold-back, etc. If eg smyte was out of money, this is plausible. And all of a sudden no-one was there to run the old corp. crunchbase says they raised a $4m A in Mar 2017, but linkedin says they had 23 employees. They could burn that in 1.25 years with 23 employees and have hit a cash crunch. I have no knowledge, just speculation.
- sgt101 8y agoThey had customers (hence the problem) and so they had revenue. So they should have had plenty runway.
- dvfjsdhgfv 8y agoIt's not unlikely the costs of work performed for these customers wasn't enough to keep the company running. Honestly, it looks more like "let's cut down on costs, immediately", rather than a mistake on a part of an exec.
- the_watcher 8y agoIt's very easy to have revenue but no runway. If your monthly burn is $1M and monthly revenue is $800K and you have no cash in the bank, you have no runway.
- glangdale 8y agoThat is not a good structure for the acquisition, especially if you are on the hook for the shell. Quite often you have all of the responsibility to deal with shit hitting the fan but no resources or personnel to actually do it.
- x0x0 8y agoThat is (obviously) the trick: the "acquirer" doesn't acquire the shell. And therefore is on the hook for nothing. Customers have contracts with a corporation with no assets and no employees.
- zaarn 8y agoThat's a pretty shitty thing to do. I would call such behavior immoral even consider it's all about not honoring contracts with customers.
- raverbashing 8y agoI wonder if this flies with a judge. Otherwise it would be a good way of making debts disappear.
- pmontra 8y agoYeah, it could be borderline with fraud.
- dvfjsdhgfv 8y agoIn some parts of the world it's actually a very common scenario. You not only get rid of debts in this way, but also employees.
- jjeaff 8y agoIt doesn't work that way. You can't just transfer assets into a shell and leave the liabilities. Any lawsuits would be able to go after the assets, even if they were in a separate shell companies.
- consp 8y agoDon't know to which jurisdiction smyte belongs, but in many countries creating figureheads/companies, dumping them, firing all employees and then buying the leftovers and rehiring people is considered the same a acquiring the company. E.g. finding ways around laws does not make them invalid and (sometimes, not always) you have to follow them anyway. But if it is all within the states, it could be just that. > If eg smyte was out of money, this is plausible. And all of a sudden no-one was there to run the old corp. Sound more like a tech/knowledge acquisition to me. 4M$ for 23 employees only works if you have proper financial management though.
- k__ 8y agoI'm still owed money from a start-up that went bankrupt, got bought by another company which is operating it as if nothing happend
- deleted 8y ago[deleted]
- chiefalchemist 8y agoSo, in a way, you're saying smyte shut down smyte. Then Twitter swept in and picked up the pieces. Kinda? The problem, it seems, Twitter got the timing __all wrong.__
- the_watcher 8y agoThis seems like by far the most likely case. That said, Twitter should know better than to let this happen, anyone could have predicted that the optics would place a lot of blame on them. I can't imagine Twitter couldn't support an additional 7 days after giving warning.
- jackconnor 8y agoSued by all of them, more likely
- dvfjsdhgfv 8y agoIdeally, yes. In practice, it depends on the contract. My bet on this is its provisions were pretty weak (and definitely not multi-million as it's suggested elsewhere) so Twitter's lawyers went through it and said "screw that", knowing that any lawsuit isn't going to be successful.
- westpfelia 8y agoJust because you buy a company doesnt mean you buy the contracts. Shit was on Smyte to tell its userbase.
- dahdum 8y agoDepends entirely on how you buy the company and structure ownership. Twitter is large enough to plan these details. I think it's fair to assume they are at fault until shown otherwise.
- jacquesm 8y agoIf you buy a company you do usually buy the contracts. Buying a company or the majority of the shares means you now own it, good and bad. If you buy the assets of the company then usually you do not buy the contracts unless they are specified as sold. In both cases if there are change-of-control clauses those could trigger with various penalties or rights becoming unlocked.
- huehehue 8y agoThere are a few reasons why it's probably not entirely Smyte's fault. Given that Smyte comms dropped off over the past month, as another commenter mentioned, there might not have been anyone around to warn the users. And if you're thinking "well they could just personally reach out to their customers if they're fired because it's the right thing to do" -- if the last-minute nature of everything is any indication, current/former employees were probably ordered not to say anything.
- s73v3r_ 8y agoThat should never be the case, and any jurisdiction that allows such is wrong.