5 ms·

My impression is it was framed as a regular purchase, not an investment. Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy

My impression is it was framed as a regular purchase, not an investment. Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy protections.

CydeWeys 8y ago
When I buy a plane ticket, that's a regular purchase, because tens of thousands of planes exist and millions of people are actually flying on planes every day. When you purchase a ticket on a spacecraft that doesn't yet exist, hasn't even been fully developed yet, and that no one has ever flown on, it's quite a different situation. I don't think the company lied about any of these facts. It should have always been clear that there was more risk involved. And the reason the refund won't happen has little to do with bankruptcy protections and everything to do with the fact that the company failed. It turns out what they had tried to do was harder than expected, and they spent all their money without coming close to the end goal. That money is gone and won't be coming back, regardless of anything having to do with bankruptcy. As the saying goes, you can't squeeze blood from a stone. In theory they may be owed their $100k back, but in practice they'll never get it because it's no longer there.
- jilop 8y ago
  They perpetuated a fraud by selling something that doesn't exist. They might have invited criminal punishment and personal tort liability.
  - lisper 8y ago
    > They perpetuated a fraud by selling something that doesn't exist. It's only fraud if they misrepresented the fact that it didn't yet exist, which seems very unlikely. Buying things that don't yet exist happens all the time. Thousands of people put down deposits on Tesla Model 3's that did not then exist. People regularly buy houses under construction, and people often lose money when the contractor fails to deliver. It happens all the time.
    - shakna 8y ago
      They (Xcor) also asserted that 35% of the ticket price would be held in 3rd party escrow for such an eventuality, which the 3rd party now asserts is not correct. That is very likely to be fraud.
      - lisper 8y ago
        Yes, that's true. But good luck recovering damages from a bankrupt defendant.
        shakna 8y ago
        I know the US is different and strange, in that a corporation is a person... ... But where I am, bankruptcy only lasts 3 years + 1 day, after which point, those that had shares within the entity that has failed, or the part-owners, will be required to begin paying back their debts. Bankruptcy is not a failsafe to prevent you paying all debts. It's just a timeout to give you time to be in a position to pay those debts. And yes, it can be declared multiple times, but it won't always be accepted.
        EGreg 8y ago
        What is the point of that, if the money invested is vastly more than what the owner can earn? The USA having bankruptcy protections is what helps foster this level of risk and entrepreneurship here.
        shakna 8y ago
        It's not investments that need to get paid back - it's contracts, or rather the value of the contract. In this case, Xcor would need to pay back the fees they said would go to escrow. Not any investor who took equity on the gamble it would be worth something.
        toast0 8y ago
  - ilrwbwrkhv 8y ago
    i mean.. planes sell tickets everyday for seats that don't exist.. its all legal...
    - CydeWeys 8y ago
      And if you end up on one of those oversold seats you get all sorts of compensation for it, like [free rebooking or a full refund] plus additional money. Depending on how badly this messes up your travel schedule, you can be owed up to 600 Euros (in the EU) plus free rebooking. It's not at all the same situation as buying a "ticket" for a rocket that hasn't even been built yet; those funds are going to be spent on R&D with no guarantee of success, and you're never going to get your money back; the best case scenario is you get to take the trip.
  - pjungwir 8y ago
    perpetrated
- benj111 8y ago
  >And the reason the refund won't happen has little to do with bankruptcy protections and everything to do with the fact that the company failed. This to me just sounds like semantics. Is there a point I'm missing? Bankruptcy is for failed companies, failed companies go bankrupt.
  - danmaz74 8y ago
    A company can go bankrupt but still have assets to pay back debts. Bankruptcy protection can apply in that case, if the business can somehow continue operating instead of simply be liquidated. But if the company has no assets to seize, bankruptcy protection doesn't apply...
  - dragonwriter 8y ago
    > Bankruptcy is for failed companies No, bankruptcy is not exclusively for failed companies. And failed companies don't always go bankrupt.
  - CydeWeys 8y ago
    The original quote was: > Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy protections Implying that, absent bankruptcy protections, the customers would somehow get their money back. My point was that, even if bankruptcy protections didn't exist, and those debts couldn't be discharged, the customers are still never getting their money back because it was spent on R&D and the company itself is now valueless.
    - benj111 8y ago
      Ah ok, that makes sense :)
- digsmahler 8y ago
  > It turns out what they had tried to do was harder than expected Literally every business/engineering project ever.
sandworm101 8y ago
>> as a regular purchase, not an investment. That won't matter. This sort of situation actually happens all the time. When a corporation goes into bankruptcy, customers are the last on the list to be paid. A more common scenario: A ski resort goes bust. What happens to people who have purchased season tickets (ski as much as you want all year) when the ski season at the resort is cancelled? There is no practical way to provide the purchased service. The entity that sold the ticket is bankrupt. By the definition of bankruptcy, there isn't enough money for everyone. The government (taxes), secured creditors and banks are paid out first. Then employees (pension funds etc) come next. There just isn't ever anything left for customers.
- alangpierce 8y ago
  I understand that neither a purchase nor an investment will get any return if the company goes bankrupt like in this situation, but I think they're very different when deciding who to blame. In an investment, the investor is intentionally putting money at risk in the hope that the project is successful. It's established up-front that if the project is unsuccessful, the invested money is lost. It's probably unfair for an investor to feel cheated when an investment doesn't work out. With this purchase, Jones paid Xcor in exchange for a service that Xcor said it could provide. Xcor neither provided the service nor can provide a refund, and Jones is very right to be upset. It's probably fair to distrust the people behind Xcor for any future financial commitments, much more than if it had been presented as an investment. You might say that this particular purchase was obviously risky enough that any reasonable person should have seen it as an investment, but I'd be hesitant to assume that the full risks were clear to everyone who paid the money, and the burden is on the company to not make commitments it can't keep. (That said, I certainly don't know if or how the risks were communicated to buyers.)
- gaius 8y ago
  The government (taxes), secured creditors and banks are paid out first. Then employees (pension funds etc) come next. There just isn't ever anything left for customers. Generally, the receivers (bankruptcy administrators, lawyers, accountants, etc) are paid first. Mysteriously their fees always seem to add up to exactly however much money was left, and there is nothing left for anyone else.

My impression is it was framed as a regular purchase, not an investment. Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy protections.

CydeWeys 8y ago

When I buy a plane ticket, that's a regular purchase, because tens of thousands of planes exist and millions of people are actually flying on planes every day. When you purchase a ticket on a spacecraft that doesn't yet exist, hasn't even been fully developed yet, and that no one has ever flown on, it's quite a different situation. I don't think the company lied about any of these facts. It should have always been clear that there was more risk involved. And the reason the refund won't happen has little to do with bankruptcy protections and everything to do with the fact that the company failed. It turns out what they had tried to do was harder than expected, and they spent all their money without coming close to the end goal. That money is gone and won't be coming back, regardless of anything having to do with bankruptcy. As the saying goes, you can't squeeze blood from a stone. In theory they may be owed their $100k back, but in practice they'll never get it because it's no longer there.

jilop 8y ago
They perpetuated a fraud by selling something that doesn't exist. They might have invited criminal punishment and personal tort liability.
- lisper 8y ago
  > They perpetuated a fraud by selling something that doesn't exist. It's only fraud if they misrepresented the fact that it didn't yet exist, which seems very unlikely. Buying things that don't yet exist happens all the time. Thousands of people put down deposits on Tesla Model 3's that did not then exist. People regularly buy houses under construction, and people often lose money when the contractor fails to deliver. It happens all the time.
  - shakna 8y ago
    They (Xcor) also asserted that 35% of the ticket price would be held in 3rd party escrow for such an eventuality, which the 3rd party now asserts is not correct. That is very likely to be fraud.
    - lisper 8y ago
      Yes, that's true. But good luck recovering damages from a bankrupt defendant.
      - shakna 8y ago
        I know the US is different and strange, in that a corporation is a person... ... But where I am, bankruptcy only lasts 3 years + 1 day, after which point, those that had shares within the entity that has failed, or the part-owners, will be required to begin paying back their debts. Bankruptcy is not a failsafe to prevent you paying all debts. It's just a timeout to give you time to be in a position to pay those debts. And yes, it can be declared multiple times, but it won't always be accepted.
        EGreg 8y ago
        What is the point of that, if the money invested is vastly more than what the owner can earn? The USA having bankruptcy protections is what helps foster this level of risk and entrepreneurship here.
        shakna 8y ago
        It's not investments that need to get paid back - it's contracts, or rather the value of the contract. In this case, Xcor would need to pay back the fees they said would go to escrow. Not any investor who took equity on the gamble it would be worth something.
        toast0 8y ago
- ilrwbwrkhv 8y ago
  i mean.. planes sell tickets everyday for seats that don't exist.. its all legal...
  - CydeWeys 8y ago
    And if you end up on one of those oversold seats you get all sorts of compensation for it, like [free rebooking or a full refund] plus additional money. Depending on how badly this messes up your travel schedule, you can be owed up to 600 Euros (in the EU) plus free rebooking. It's not at all the same situation as buying a "ticket" for a rocket that hasn't even been built yet; those funds are going to be spent on R&D with no guarantee of success, and you're never going to get your money back; the best case scenario is you get to take the trip.
- pjungwir 8y ago
  perpetrated
benj111 8y ago
>And the reason the refund won't happen has little to do with bankruptcy protections and everything to do with the fact that the company failed. This to me just sounds like semantics. Is there a point I'm missing? Bankruptcy is for failed companies, failed companies go bankrupt.
- danmaz74 8y ago
  A company can go bankrupt but still have assets to pay back debts. Bankruptcy protection can apply in that case, if the business can somehow continue operating instead of simply be liquidated. But if the company has no assets to seize, bankruptcy protection doesn't apply...
- dragonwriter 8y ago
  > Bankruptcy is for failed companies No, bankruptcy is not exclusively for failed companies. And failed companies don't always go bankrupt.
- CydeWeys 8y ago
  The original quote was: > Xcor owes them a full refund, and the only reason it won't happen is due to bankruptcy protections Implying that, absent bankruptcy protections, the customers would somehow get their money back. My point was that, even if bankruptcy protections didn't exist, and those debts couldn't be discharged, the customers are still never getting their money back because it was spent on R&D and the company itself is now valueless.
  - benj111 8y ago
    Ah ok, that makes sense :)
digsmahler 8y ago
> It turns out what they had tried to do was harder than expected Literally every business/engineering project ever.

sandworm101 8y ago

>> as a regular purchase, not an investment. That won't matter. This sort of situation actually happens all the time. When a corporation goes into bankruptcy, customers are the last on the list to be paid. A more common scenario: A ski resort goes bust. What happens to people who have purchased season tickets (ski as much as you want all year) when the ski season at the resort is cancelled? There is no practical way to provide the purchased service. The entity that sold the ticket is bankrupt. By the definition of bankruptcy, there isn't enough money for everyone. The government (taxes), secured creditors and banks are paid out first. Then employees (pension funds etc) come next. There just isn't ever anything left for customers.

alangpierce 8y ago
I understand that neither a purchase nor an investment will get any return if the company goes bankrupt like in this situation, but I think they're very different when deciding who to blame. In an investment, the investor is intentionally putting money at risk in the hope that the project is successful. It's established up-front that if the project is unsuccessful, the invested money is lost. It's probably unfair for an investor to feel cheated when an investment doesn't work out. With this purchase, Jones paid Xcor in exchange for a service that Xcor said it could provide. Xcor neither provided the service nor can provide a refund, and Jones is very right to be upset. It's probably fair to distrust the people behind Xcor for any future financial commitments, much more than if it had been presented as an investment. You might say that this particular purchase was obviously risky enough that any reasonable person should have seen it as an investment, but I'd be hesitant to assume that the full risks were clear to everyone who paid the money, and the burden is on the company to not make commitments it can't keep. (That said, I certainly don't know if or how the risks were communicated to buyers.)
gaius 8y ago
The government (taxes), secured creditors and banks are paid out first. Then employees (pension funds etc) come next. There just isn't ever anything left for customers. Generally, the receivers (bankruptcy administrators, lawyers, accountants, etc) are paid first. Mysteriously their fees always seem to add up to exactly however much money was left, and there is nothing left for anyone else.