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Ok, then why is loss-making more acceptable (safer for small investors) in a formerly profitable company than it is for a not-yet-profitable company? And as ot

Ok, then why is loss-making more acceptable (safer for small investors) in a formerly profitable company than it is for a not-yet-profitable company? And as others have pointed out you are exactly wrong about efforts to make public investment available earlier. Besides founders who would love to have more fundraising options, there is plenty of evidence and outcry that small investors are not getting access to economic growth: https://www.theatlantic.com/magazine/archive/2018/11/private-inequity/570808/ https://www.theatlantic.com/magazine/archive/2018/11/private...

chc 8y ago
> Ok, then why is loss-making more acceptable (safer for small investors) in a formerly profitable company than it is for a not-yet-profitable company? One has demonstrated the ability to turn a profit and the other has not. This seems a bit like asking "Why is radiation considered a valid cancer treatment and rhino horn isn't when both have failed to help people before?"
- evrydayhustling 8y ago
  People have a lot better info than total profitability to answer "can this make money" or not. Financial statements (like this S-1) do their best to separate out how much is being spent to keep customers from how much is spent to acquire them. In lots of cases (including this one) the company has proved that they have a profitable relationship with existing customers, and that they have tolerable-and-dropping costs in acquiring new customers (in this case it looks like they are breaking even on new customers in around 9 months). There are exceptions and sleight of hand (like when Uber doesn't reveal costs to get drivers, but this is 100% true for formerly-profitable companies too. You could make a much better argument for skipping on those, or by forcing more disclosure in S-1s. But painting broadly based on total profitability is just too simplistic.

chc 8y ago

> Ok, then why is loss-making more acceptable (safer for small investors) in a formerly profitable company than it is for a not-yet-profitable company? One has demonstrated the ability to turn a profit and the other has not. This seems a bit like asking "Why is radiation considered a valid cancer treatment and rhino horn isn't when both have failed to help people before?"

evrydayhustling 8y ago
People have a lot better info than total profitability to answer "can this make money" or not. Financial statements (like this S-1) do their best to separate out how much is being spent to keep customers from how much is spent to acquire them. In lots of cases (including this one) the company has proved that they have a profitable relationship with existing customers, and that they have tolerable-and-dropping costs in acquiring new customers (in this case it looks like they are breaking even on new customers in around 9 months). There are exceptions and sleight of hand (like when Uber doesn't reveal costs to get drivers, but this is 100% true for formerly-profitable companies too. You could make a much better argument for skipping on those, or by forcing more disclosure in S-1s. But painting broadly based on total profitability is just too simplistic.