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Should you consider past losses at all, though? Wouldn't you just be committing the sunk cost fallacy? [1] [1] https://en.wikipedia.org/wiki/Sunk_cost https://

• sjy 7y ago
  It is not a fallacy to consider sunk costs when they can help you estimate the marginal return on a new investment. This is likely when you are investing in something which is hard to value, with diminishing returns, like growth marketing. Making another $1 billion loss next year might be rational, but if profitability keeps getting deferred year after year, eventually it will become irrational to continue throwing good money after bad.
• rchaud 7y ago
  I'd consider sunk costs on a project basis, as way to determine the profitability of an individual project, like the construction of an office building. For an IPO for a commercial leasing company however, a growth stock should be demonstrating positive cash flow net of financing costs. I know WeWork has these absurd WeLearn, WeLive pipe dreams to explain their growth strategy, but that takes time, and can be reversed suddenly. Uber's big pitch was "self-driving taxis" until the new CEO arrived, saw that it was a pipe dream, and focused the growth trajectory on to something more realistic like bike sharing and meal delivery. Given all that, if WeWork are IPO'ing now, I'm interested in seeing how far away they are from positive cash flow on their core business as it stands.
  • Phillipharryt 7y ago
    In the long term you're literally not supposed to consider sunk costs when evaluating a project, it's like finance 101.